The US Dollar declines for a second consecutive day reaching a key support level for the currency. Expectations that the Federal Reserve will pause for the upcoming months are driving the Dollar lower. At the same time, Gold and the stock market continue to gain bullish momentum and reach previous highs.

However, economists are paying close attention to bond yields, which continue to remain at a significant high and oil still trades above $80 per barrel. Over the weekend, Israel has attacked Iran’s proxy in Lebanon and Trump will soon announce the “economic plan” for Iran.

While oil prices remain above $80 and US bond yields remain high, the risk of a quick sudden decline is still elevated.

US Dollar Weakens To Key Levels

The US Dollar is the worst-performing currency of the day despite higher oil prices and higher bond yields. The decline is driven by investors pricing in no rate hike in September or October. A prolonged pause has become likely for the upcoming 2 months due to a slightly weaker consumer inflation and considerably lower producer inflation.

However, investors should keep in mind that the Dollar index is trading at a key support level at 99.25. This level was tested on July 31st and August 7th. However, the price is not forming a descending triangle pattern but rather a range bound condition. This means that buyers continue to hold strength at times. On the other hand, as the asset continues to retest the support level, the level may weaken and prompt a breakout.

Even though the Dollar is trading clearly lower, investors should be cautious of high oil prices and bond yields which normally push the price higher.

The best performing currencies of the day so far are the Australian Dollar, New Zealand Dollar and Swiss Franc.

NASDAQ Rises But Risk Remain

The NASDAQ moved higher, but not at the same pace as the decline seen in July. A neutral Federal Reserve is driving the bullish impulse wave. However, the fact that the Dollar is declining but yields are rising indicates key concerns for stocks. Investors fear the huge government borrowing, that inflation will remain high for years and that hikes will return later in the year.

Analysts advise that the AI trend will remain bumpy and that traders should be cautious of the above triggering a sudden decline. The key resistance level stands at $30,750, but NVIDIA’s earnings towards the end of the month will also influence the long-term price movement.

This week, the main earnings report release will come from Walmart which is the 12th most influential stock for the NASDAQ. Walmart stocks rose 3.90% over the past week.

Gold Turns Bullish In The Short-term

The key factors for Gold are inflation and the Middle East. The US plans to hit Iran's economy hard, with President Donald Trump saying he doesn't care whether the conflict ends before the November US midterm elections. Scott Bessent also advises the move will hit Iran hard and will be the harshest ever seen. If the move keeps oil prices higher for longer, Gold may come under pressure again.

The 30-minute and 1-hour signals are currently both “Strong Buy” according to moving averages. Gold also broke above the previous $4,380 resistance, while remaining above its short-term EMA structure. If the price rises above $4,406.00, which is the level where the current impulse wave surpasses 65% of the previous retracement, bullish signals will strengthen.

For bullish signals to be valid, traders will also be monitoring whether the Dollar remains closer to 99.00. Bond yields will also need to avoid rebounding during the day.

Key Takeaways:

• The US Dollar falls for a second day as markets increasingly price in a Fed pause. The US Dollar Index is testing key support near 99.25.
• Gold and the NASDAQ remain bullish in the short-term, supported by a weaker Dollar and reduced expectations for rate hikes.
• High US bond yields and oil prices above $80 remain major risks and could trigger sudden reversals across markets.
• Middle East tensions and Trump’s upcoming economic measures against Iran could keep oil and inflation risks elevated.
• NVIDIA and Walmart earnings remain a key catalyst for the NASDAQ.