DXY, EURUSD, Gold Forecast: Dollar Pressured at 3-Year Lows as Gold Powers to New Highs

Key Events:

• Gold breaks new records, exceeding $3,300/oz on haven demand
• Trade war risks deepen: U.S. halts NVIDIA chip exports; China retaliates with rare earth bans
• ECB Meeting (Thursday) and Powell’s speech (tonight) expected to spark volatility in EURUSD, DXY, and Gold
• China’s economic data beats expectations, showing resilience despite tariffs

US Dollar Index Holds at Critical Support Ahead of 2008 Trendline and ECB Decision

The U.S. Dollar Index (DXY) is currently hovering at 3-year lows, testing key support at 98, while EURUSD faces critical resistance at 1.15, a level that must be breached to confirm a stronger bullish trend. Trade tensions between the U.S. and China continue to weigh heavily on both economies, keeping the dollar subdued near 99, and EURUSD anchored near 1.13.

This is despite recent upbeat economic data from China showing resilience in the face of ongoing tariff disputes that have persisted since early 2025:

• GDP: Stabilized at 5.4%, beating expectations of 5.2%
• Industrial Production: Surged to 7.7%, above the 5.9% forecast
• Retail Sales: Rose to 5.9%, surpassing the 4.0% estimate

Meanwhile, Beijing has insisted on respect as a prerequisite for trade negotiations, while tensions have escalated further: the U.S. halted NVIDIA chip exports to China, and in response, China banned exports of rare earth minerals vital for U.S. defense manufacturing.

These developments add further downside risk to markets ahead of Thursday’s earnings reports from Netflix and TSMC. With geopolitical heat intensifying and Gold hitting record highs, markets are looking for signs of a potential trade resolution to sustain the rebound that began last Wednesday following the delay in tariff announcements. The upcoming speech from Fed Chair Jerome Powell tonight could introduce fresh catalysts into the markets.

Gold Extends Record Highs Towards 2016-2020 Trendline

Gold continues its relentless rally, extending record highs above $3,300, fueled by haven demand as risk appetite remains subdued. Despite overbought momentum similar to that seen in 2011 and 2020, the rally persists.

Currently, Gold is approaching a critical resistance trendline, connecting major highs from 2016 to 2020. A sharp reversal could materialize if a trade deal is announced. However, in the absence of a resolution, Gold may continue its climb. 

US Dollar Index- Monthly Time Frame – Log Scale

Source: Tradingview

US Dollar Index (DXY): The DXY remains weak, holding between the 98–99 support zone, a key area within a long-standing bullish channel dating back to the 2008 lows.

• A break below 98 could trigger a deeper decline toward the lower boundary of this channel.
• Conversely, a rebound above 100 remains possible—but would require a strong U.S. economic report to be sustained.

From the opposite end we have the EURUSD:

EURUSD - Weekly Time Frame – Log Scale

Source: Tradingview

While the dollar lingers at 3-year lows, the euro is testing 3-year highs, facing critical resistance at 1.15. A confirmed breakout above 1.1520 may open the path to 1.17 and 1.1980, revisiting the 2021 highs.

If the euro pulls back, support levels to watch are: 1.1270, 1.1140, 1.10, and 1.0920, especially if overbought momentum fades—last seen at these levels in 2020.

Gold Forecast: Monthly Time Frame – Log Scale

Source: Tradingview

Despite overbought monthly momentum, Gold continues to climb, supported by haven demand.

• The metal is currently testing a key resistance trendline connecting the 2016–2020 highs, around $3,300.
• A break above $3,330–$3,350 would put Gold on course toward $3,400 and higher
• On the downside, if momentum stalls, key support levels include $3,290, $3,250, $3,220, and $3,200
• A meaningful reversal would likely require progress in peace or trade negotiations to shift sentiment away from risk aversion

Written by Razan Hilal, CMT

Follow on X: @RH_waves