Dollar Rebound Falters as Markets Eye Key Vote on U.S. Tax Bill

Key Takeaways:

• The U.S. dollar staged a modest technical rebound but remains under pressure as fiscal concerns and political uncertainty persist.

• Investors fear that Trumps proposed tax cuts could widen the U.S. deficit, undermine confidence in fiscal stability

• Heightened risk aversion and ongoing political risks are supporting gold prices, with further gains possible if market sentiment deteriorates.

Market Summary:

The U.S. dollar staged a technical rebound after slipping to a two-year low, with the Dollar Index (DXY) briefly recovering by more than 0.5% in the previous session to 96.37. However, the rebound lost steam in the latest session as market participants adopted a cautious stance ahead of the House of Representatives vote on the Senate-approved version of the Trump administrations sweeping tax cut—dubbed the “Big and Beautiful” bill.

Investors are growing increasingly concerned that the proposed tax cuts, if passed, could exacerbate the already fragile state of U.S. fiscal health by slashing government revenue and driving up the national debt. Such a scenario risks undermining market confidence in Washingtons ability to meet its debt obligations, potentially putting further downward pressure on the greenback.

While the passage of the bill could trigger temporary volatility and dent risk appetite across financial markets, uncertainty over whether the legislation has enough support to pass in the House is already weighing on sentiment. The dollar, which is already under pressure from fiscal concerns and political uncertainty, may continue to trade with a soft bias should doubts over the U.S. governments credibility persist.

Meanwhile, heightened risk aversion could bolster safe-haven demand, with gold poised to benefit as it hovers near record highs. Any further deterioration in market sentiment could see the precious metal gain additional ground.

Technical Analysis

Dollar_Index, H4:

The U.S. Dollar Index (DXY) attempted a rebound from its recent downtrend but failed to break back above its previous sideways range, highlighting the persistence of bearish momentum. The index has remained capped below its long-term descending resistance line since the start of the year, reinforcing the broader downside bias.

A break below the recent lows would likely confirm a fresh bearish signal for the index. Momentum indicators continue to reflect selling pressure, with the Relative Strength Index (RSI) holding below the midline and the MACD hovering near the bottom, both underscoring the dominance of the bearish trend.

Resistance Levels: 97.10, 98.30

Support Levels: 96.25, 95.75