Market Insights: Fed Minutes Impact on USD; Analysis of USD/JPY, EUR/USD, and Gold Setups

The U.S. dollar, gauged by the DXY index, demonstrated a rebound but retreated from its session high as the Fed minutes prompted a pullback in yields. The minutes revealed that interest rates may remain high for an extended period, but policymakers acknowledge a shift in inflation risks toward greater balance, signaling a potential easing cycle.

The fluidity of the Fed’s policy outlook emphasizes the importance of closely monitoring macro data, as it will guide the central bank’s decisions and the timing of potential rate cuts. The upcoming December nonfarm payrolls survey (NFP) on Friday is a key report to watch.

Consensus estimates suggest the addition of 150,000 jobs in December, down from 199,000 in November, with the unemployment rate expected to edge up to 3.8%. A balance between supply and demand for workers could alleviate future wage pressures.

The U.S. dollar’s continued recovery hinges on robust labor market figures, indicating strong and dynamic hiring. A figure above 200,000 in the NFP report would be bullish for the greenback. Conversely, a significant miss below 100,000 jobs could weaken the dollar, validating expectations of deep rate cuts.

USD/JPY saw a rally surpassing its 200-day simple moving average (SMA), suggesting a potential rally towards 144.80 if the breakout is sustained. A pullback below the 200-day SMA may lead to a sentiment shift, with support at 140.95 and further downside risking a move towards trendline support at 140.00.

EUR/USD, after reaching multi-month highs, faced a bearish rejection near 1.1140 and slipped below support at 1.0935. Sustaining this move may direct the pair towards channel support at 1.0840. A bullish reversal could encounter resistance at 1.0935, followed by 1.1020, with a break potentially targeting 1.1075/1.1095 and challenging the high at 1.1140.

Gold experienced a downturn, falling below technical support between $2,050 and $2,045. Prolonged trading beneath this range may lead to a decline towards the 50-day SMA at $2,010, and further weakness might target $1,990, followed by $1,975. A reversal could find initial resistance at $2,045-$2,050, with a breakout challenging December’s high and potentially reaching the all-time high near $2,150.

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