The U.S. dollar bounced back on Wednesday after a Bloomberg report suggested that currency issues are not part of current trade negotiations, calming investor concerns that Washington might be quietly pushing for a weaker greenback. The rebound sent shockwaves through currency markets, causing the Australian dollar to pull back sharply and gold to extend its losses below a key technical level.
Dollar Finds Its Footing
The greenback, which had been on the defensive earlier in the week, reversed course following reports that the U.S. isn’t seeking currency related commitments in its ongoing trade discussions. Treasury Secretary Scott Bessent is reportedly managing all foreign exchange matters personally, reinforcing the view that FX policy isn’t up for negotiation.
Still, the broader market remains cautious. Sharp rallies in Asian currencies such as the Korean won and Taiwan dollar suggest traders aren’t entirely convinced. These countries are actively involved in trade talks with Washington, and their strengthening currencies may hint at possible behind the scenes compromises. Meanwhile, longer-term Treasury yields are inching higher, which could further support the dollar but only if confidence in U.S. fiscal policy holds.
Aussie Dollar Rejected at Key Level Again
AUD/USD remains a pair to watch ahead of Australia’s latest jobs data. The pair once again failed to clear the 200-day moving average, sliding back toward 0.6430 a key level that’s flipped between support and resistance since last year.
Traders seem unwilling to chase strength above 0.6500, keeping the pair range-bound. While the broader recovery from April’s lows remains technically valid, momentum has clearly cooled. The next move will likely hinge on how the jobs report shapes expectations for interest rate cuts by the Reserve Bank of Australia.
Market consensus still sees a 25 basis point cut next week, but the details in today’s report particularly unemployment and underemployment figures could influence whether the RBA sticks to a dovish path through the end of the year.
Gold Drops Below $3200 as Headwinds Mount
Gold prices slipped below the $3200 mark, as stronger than expected U.S. economic data, higher real yields, and signs of easing geopolitical tensions weighed on the precious metal. The bearish momentum is building, and traders are starting to view rallies as short-term selling opportunities.
Technical charts suggest that a break below the 50-day moving average and the long-term trendline from December 2023 could open the door for a deeper move toward $3057.50. Resistance in the near term sits at $3200 and $3270.
Later today, market attention shifts to U.S. producer price index (PPI) and retail sales data. While tariffs could cloud the interpretation of these numbers, core PPI components are of particular interest since they feed directly into the Fed’s preferred inflation measure, the core PCE. If trade duties are indeed pushing up prices, this is where the impact will likely show up first.
