Will the FOMC minutes surprise?

The first session of the new year brought a decline in the Nasdaq Composite Index by 1,6%. The broad SP500 lost nearly 0,6 percent. The dollar strengthened a EUR / USD exchange rate fell below 1,0950. US bond yields have grown across the yield curve. The market is now looking at data from the US labor market and the minutes from the December FOMC meeting.

The eurodollar is still in an upward channel

Jay Powell's comments after the last meeting FOMC, which took place on December 13, sounded "dovey". They caused the US dollar to lose value and the EUR/USD rate to rise from 1,08 to above 1,11. Now a correction of this upward movement is visible. Currently, the market is wondering whether this reaction was not exaggerated. From a technical point of view, the main currency pair is currently declining they broke the horizontal support at 1,10. The quotations have been following a fairly regular upward channel since the beginning of November. At the end of 2023, the currency pair came much closer to its upper barrier.

The current discounts are so far smaller than those that occurred at the turn of November and December. So at this point, attention should be focused on where to look for the potential bottom of the current declines. The optimal level seems to be 1,0870-1,0880. The lower limit of the mentioned channel and the internal Fibo 38,2% retracement line run in these areas. If the declines ended in these areas, we would witness the phenomenon of "equal corrections".

Easing monetary policy?

Returning to today's "minutes" from the FOMC, based on them the market will want to objectively assess what the American monetary authorities really had in mind and whether the "dovish" interpretation of Powell's comments was exaggerated or not. However, it is hard to imagine that the notes would suggest easing monetary policy more than the chairman's words. So there is a greater risk of that publication of the protocol may strengthen the USD and cause the main currency pair to slide further.

Let's not forget that we will know important data from the American economy earlier. At 16:00 p.m. the ISM industry report and the JOLTS survey will be presented. Tomorrow, the ADP and weekly data on the number of benefit applications will be published. However, the market is actually waiting for NFP report, which is traditionally served on the first Friday of the month. Another one is expected here a cooling signal in the form of fewer new jobs (170) and an increase in the unemployment rate to 3,8%.

Source: Łukasz Zembik, OANDA TMS Brokers