USD/JPY drops to 108 area on dovish FOMC minutes
- Fed reaffirms its officials' dovish message in December meeting minutes.
- Wall Street looks to close fourth straight day higher.
- US Dollar Index falls to multi-month lows below 95.20.
After testing the 108 handle earlier in the day, the USD/CAD retraced a small portion of its daily fall before coming under a renewed selling pressure in the late NA session with the greenback weakening against its rivals following the FOMC's December meeting minutes. At the moment, the pair is down 0.6% on the day at 108.08.
Earlier today, the US Dollar Index lost its traction after Fed officials voiced their concerns over the downside risks to the economy and argued that the Fed could hold off on further rate hikes while waiting for the data. On the same note, the FOMC in its December meeting minutes said that the Committee expressed the view that the Fed could afford to be patient about further policy firming. The publication further stated that the monetary policy was not on a preset course; neither the pace nor the ultimate endpoint of future rate increases were known.
Commenting on today's developments, "Excellence in Fed messaging. FOMC minutes upstaged by Fed Presidents Bostic, Bullard, Evans and Rosengren. who recently advised caution and patience in Fed policy this year. It will probably be mid-year and depending before the Fed excites hike prospects again," noted FXStreet senior analyst Joseph Trevisani.
The US Dollar Index pushed lower on the Fed's dovish message and touched its lowest level since mid-October at 95.15. At the moment, the DXY is down 0.75% on the day at 95.18.
On the other hand, the FOMC minutes helped major equity indexes in the U.S. cling to their gains, making it difficult for the USD/JPY to extend its decline.
Technical levels to consider
With a decisive break below 108 (psychological level/daily low), the pair could aim for 107.50 (Jan. 4 low) and 106.75 (Jan. 3 low). On the upside, resistances are located at 109.00/109.10 (daily low/Jan. 8 low), 109.95/110 (20-DMA/psychological level) and 110.50 (Dec. 31 high).