U.S. Dollar Weaker ahead of Fed Minutes

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The U.S. Dollar is trading sideways-to-lower as investors await the release of the Federal Reserve minutes. Interest in the minutes is high as investors will try to decipher the next phase of monetary policy and whether it involves the release of additional economic stimulus. 

In today’s release of the Fed minutes from its two-day meeting that ended on August 1, central bank officials passed on a third round of quantitative easing. Since then currencies, commodities and equities have firmed as traders priced in the possibility of more easing.

Speculation is building that the Fed may have left clues as to further action in its minutes, leading some to believe that action may take place as early as the Kansas City Fed’s annual conference on August 30 to September 1 inJackson Hole,Wyoming. Others are banking on the September meeting for the announcement of additional QE while some still feel the central bank doesn’t have to act until December.

The EUR/USD is trading slightly better, but the move has been muted as traders await the news from the Fed. Currently, the currency pair is trading inside of a major retracement zone bounded by 1.2394 to 1.2478. This zone could act as both support and resistance depending on how much information the Fed reveals in its minutes. 

Traders are also being sidelined today because of tomorrow’s key meeting between German Chancellor Angela Merkel and French President Francois Hollande. The meeting will include a discussion of the current fiscal crisis as well as concessions for Greece.

After breaking through a pair of old tops at 1.5767 and 1.5773 on Tuesday, upside momentum in the GBP/USD has slowed considerably as the currency pair has reached a key retracement zone at 1.5771 to 1.5890. Optimism over developing moves by the European Central Bank helped launch yesterday’s rally and is underpinning the market today. Traders are holding back from further advancement because of lingering problems in the U.K. economy as well as the possibility of additional stimulus from the Bank of England.

December Gold is following through to the upside after Tuesday’s strong rally. The trend turned up in this market in late July, but the lack of urgency held the market in a range. Traders have been trying to decide whether gold is an investment or a reserve currency. The combination of low prices coupled with a falling dollar is helping to underpin the market and trigger upside volatility. Gold reached its highest level since early May today, leading to speculation that there is enough buying power to take it to a major 50% retracement price at $1668.15 over the near-term. 

The weaker U.S. Dollar and the possibility of military activity betweenIsraelandIranare helping to underpin October Crude oil today. The technical picture continues to look promising for further upside action as the market is currently trading on the bullish side of a key pivot zone at $92.64 to $96.16. This morning’s reported drop in crude oil stocks is also providing some support. 

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About: FX Empire Analyst - James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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