Fed Fumes Dollar to Fresh Highs, What’s Next?

The FOMC meeting minutes were the highlight of yesterday as it fueled a massive rally in the US Dollar. The US dollar traded higher against a basket of currencies, including the Euro, the British pound, the Swiss franc, the Japanese yen and the Australian dollar. The main points to note from the FOMC meeting minutes which could impact the US dollar in the short term are:
· Change of tone from dovish to hawkish.
· Debate on increasing rates early as the US job market continues to excel.
· Less worried about the inflation.
· Greater readiness to normalize monetary.

The US dollar buyers were encouraged by the FOMC minutes. The pairs which were affected the most were the EURUSD and GBPUSD. The EURUSD broke the 1.3300 support area to shed more than 50 pips in a matter of hours. The GBPUSD pair also broke the 1.6600 support area to challenge the 1.6550 support level. The recent minutes also put the case of a more hawkish fed stance in the coming meetings. So, the US dollar might gain traction if this idea meets the expectation. The investors were eyeing the minutes to determine the outlook for central-bank policy. They were not expecting more hawkish tone, which caused the US dollar to take control.


US Initial Jobless Claims

The US initial jobless claims data was published earlier during the New York session by the US Department of Labor. The forecast was slated for a decline from 311K to 300K. However, the outcome was on the positive side, as the US seasonally adjusted initial claims was 298,000, a decrease of 14,000 from the previous week's revised level. This further added to the bullish pressure on the US dollar.




Technically, the EURUSD pair managed to find buyers around the 1.3250-40 support area, but there remains a risk of further declines in the short term. It is possible that the pair might bounce slightly from the current levels. However, the Euro buyers are likely to struggle around the 1.3300-20 resistance area, which might act as a pivot zone for the pair. If the pair manages to clear the mentioned resistance, then a move towards the 1.3350-60 area is possible moving ahead. On the downside, the 1.3200 area holds the key, as a break below might expose a test of the 1.3100 area.