The minutes of the November 1st FOMC meeting, set to be released tonight, will provide insight into the Federal Reserve’s future plans. While the market predicts that interest rates have reached their peak and will be cut next year, Fed Chair Powell remains cautious about declaring victory over inflation. Powell emphasizes that if necessary, the central bank will continue to hike rates, while market expectations indicate a possible 100-basis point reduction in US interest rates by the end of 2024, starting with a 25bp cut in May.
As the market becomes increasingly convinced that interest rates will not go any higher, the US dollar has been weakening. Since the beginning of November, the US dollar index has declined by four points and has easily broken through several key support levels. Failure to recapture the 200-day simple moving average may result in further losses for the greenback.
On the other hand, gold’s technical outlook appears positive. After experiencing a sell-off in the past three weeks as risk sentiment improved, the precious metal is eyeing the US interest rate landscape and trending higher. Gold is currently trading above all three moving averages and has surpassed the 23.6% Fibonacci retracement level at $1,972. The next target for bullish investors is the recent high of $2,009/oz, with support levels identified at $1,972/oz and $1,960/oz.
Following Wednesday’s session, financial markets are expected to quiet down as the US celebrates Thanksgiving Day on Thursday, followed by the annual Black Friday event. This decrease in market liquidity could subdue volatility heading into the weekend.
Frequently Asked Questions (FAQ)
1. What factors are influencing the US dollar?
The market’s expectation of future interest rate cuts is putting pressure on the US dollar, resulting in its recent weakness.
2. What is the current technical outlook for gold?
Gold’s technical setup is positive, as the precious metal has rebounded and is now trading above key moving averages and Fibonacci retracement levels.
3. How might the Thanksgiving break impact financial markets?
The Thanksgiving holiday and subsequent Black Friday event are likely to lead to a decrease in market activity and volatility due to reduced liquidity.
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