The Fed expectedly kept the key rate at the highest level in 22 years in the 5.25%-5.50% range but kicked off a powerful rally in equities and dollar sell-off with a dramatic change in rhetoric. Despite the tight monetary conditions, it gave key indices fuel for a rally. The Dow Jones hit an all-time high above 37200, while Nasdaq100 futures were only 0.5 percent off their peak set just over two years ago as of Thursday morning. The rally in stocks that started last Thursday added more than 5.5% to the Nasdaq100 and about 3.5% to the Dow Jones. Confirmation of the Fed's dovish shift gave additional strength to buyers, and liquidation of short positions by bears caught off guard gave additional amplitude to the move. The reason for the rally was the change in the FOMC forecasts, according to which the committee expects three rate cuts from current levels next year, although it had previously forecast one more rate hike this year and two cuts in 2024. That's precisely what the markets, on average, were expecting several weeks ago. However, encouraged by the reversal in rhetoric, futures are now pricing up for five rate cuts over the next year. Over the past two years, the market has methodically built a softer stance into expectations, and the Fed has worked to 'manage expectations' by cooling the bulls. But it hasn't done so now. If, indeed, the market has switched into a phase where the tail wags dog, it is worth preparing for a cycle of high volatility in the years ahead. Powell's fresh momentum has taken the Dow Jones index further into overbought territory on the RSI to the 85 level. Since late 2007, we have seen the index hit a similar overbought scale only three times: precisely seven years ago, in December 2016, in October 2017, and in January 2018. In the first two cases, the spike was followed by more than a month of horizontal consolidation and a subsequent spurt upward. It was only in the third case that a subsequent 2% rise in five sessions turned into a 12% correction. In other words, despite the extremes and apparent overbought in stocks, investors should be cautious about betting on a near-term decline in the indices: we may see both a prolonged consolidation and a renewal of the highs.

Gold price is consolidating weekly gains above $2,030 early Friday. US Dollar licks its wounds alongside the US Treasury bond yields after the dovish Fed pivot.    Gold price remains exposed to upside risks amid favorable technicals.   Gold price is fluctuating between gains and losses while trading in a tight band above the $1,930 level early Friday, as buyers pause to digest this week's positive developments heading toward the pre-Christmas lull next week. Gold price set for weekly gain on Fed pivot Even so, Gold price is on track to book a weekly advance, snapping the previous week's sharp pullback from all-time highs of $2,144. The Asian side trend in the Gold price can be attributed to a pause in the US Dollar sell-off, as the US Treasury bond yields attempt a tepid bounce. The US Dollar also finds a floor, as the Asian stocks pare early gains, gearing up for the release of the preliminary PMI data from the US and the Eurozone, which will throw fresh insights into the state of the global economy. The US Dollar is licking its wounds, inflicted by the US Federal Reserve's (Fed) dovish pivot, with Chair Jerome Powell affirming 2024 interest rate cut expectations. In contrast, the Bank of England (BoE) and the European Central Bank (ECB) on Thursday left the door ajar for further tightening while reinstating that rates will stay 'higher for longer'. The US Dollar suffered heavily on Thursday, as the monetary policy divergence between the Fed, the BoE and the ECB came to the fore. The Greenback found some respite from an unexpected rise in the US Retail Sales data and falling Jobless Claims. But the US Dollar reprieve emerged as temporary, as the dovish Fed outlook-led global risk-on rally smashed it's once again, keeping Gold price elevated near eight-day highs of $2,048. Looking ahead, the global PMI data will provide fresh trading impetus, as the end-of-the-week flows and profit-taking will likely remain in play, especially after a central banks-dominated volatile week draws to an end. Gold price technical analysis: Daily chart Having extended Wednesday's recovery above the key $2,040-$2,050 supply zone, Gold price failed to find a foothold above the latter on a daily closing basis on Thursday. With the 14-day Relative Strength Index (RSI) indicator, however, still holding above the midline, the bullish potential appears intact for Gold price so long as it defends the critical short-term 21-day Simple Moving Average (SMA, now at $2,015. A sustained break below the latter will reopen floors toward a test of the $2,000 threshold, below which the 50-day SMA support at $1,980 will be back in play. On the flip side, a daily close above the $2,040-$2,050 region is critical to unleashing additional Gold price recovery toward the $2,100 psychological level.

Stocks finally edged higher into the close Thursday after a shaky session that followed substantial gains in the previous trading day. Surprisingly impressive, although a temperature check is bound to occur with so many folks thinking the market has gotten too far over its skis on the pace of rate cuts. That said, with $ 6 trillion of dry powder sitting in money market funds that might be champing at the bit to take the plunge into stocks, it should, at minimum, keep short sellers wary. All three major U.S. indexes made advances, putting them on course for weekly gains. The Dow, in particular, closed at a record high for the second time this year. Benchmark bond yields, influenced by the Federal Reserve's indication of potential interest-rate cuts in 2024, reached multi-month lows. Investors have been increasingly anticipating a pivot by the Federal Reserve towards lowering interest rates in the coming year, and the central bank supported this view on Thursday by forecasting three "Insurance "rate cuts in 2024. The subsequent strong bond rally has had a ripple effect on other assets, and even the beleaguered oil market has punched higher as the dollar turned precipitously weaker on stronger pushback on EU and UK market rate pricing from the ECB and BOE. View It's not necessarily that the Federal Reserve is inherently dovish; instead, its current stance is a response to the unexpectedly rapid decline in US inflation. The Fed is adjusting its approach in reaction to these economic dynamics. Given the parallels, the European Central Bank (ECB) may find itself compelled to make a similar shift. The situation is even more pronounced in the Eurozone, where inflation is experiencing a substantial downturn. Hence, it might be time to look at fading the ECB leg of the weaker US dollar move.

AUD/USD Current Price: 0.6706 The Australian employment report surpassed expectations. Despite upbeat US data, the US Dollar remains under pressure. The AUD/USD maintains strong bullish momentum, trading at four-month highs. The AUD/USD is maintaining a strong position at four-month highs, although it has not been able to hold above 0.6700 firmly. The pair continues to rally, supported by broad-based weakness in the US Dollar, as well as positive Australian economic data providing some additional boost. Labor market data from Australia exceeded expectations in November. Employment increased by 61,500, surpassing the expected figure of 11,000. This marks the second consecutive month of robust employment data. The unemployment rate rose from 3.8% to 3.9% due to a rise in the participation rate, which reached a record high.  The Australian Dollar (AUD) received a modest boost after the release of the labor market data. The weakness of the US Dollar drove most of the rally during the Asian session. AUD/NZD climbed to two-week highs above 1.0800, also driven by weaker-than-expected New Zealand Q3 GDP data. The primary driver for AUD/USD remains the decline of the US Dollar following the FOMC December meeting, which is viewed as a turning point for the central bank. However, the data released from the US on Thursday showed better-than-expected numbers, contributing to a recovery of the US Dollar. Retail Sales surprised with an unexpected 0.3% increase in November, and Initial Jobless Claims dropped to 202,000, the lowest level in eight weeks. The preliminary December reading of the Australian PMI is due early on Friday. From the US, reports include the Empire Manufacturing Index, Industrial Production, and the S&P Global PMI. AUD/USD short-term technical outlook The AUD/USD has risen for the second consecutive day on Thursday, accumulating a gain of over 150 pips. The rally pushed the Relative Strength Index (RSI) to levels near 70 in the daily chart, indicating potential overbought conditions. However, the bias in the chart remains upward, with price above key bullish simple moving averages (SMA). The pair is within an ascendant channel, with the upper limit standing at 0.6770, which is expected to hold. The critical support level is located at 0.6550. On the 4-hour chart, the Moving Average Convergence Divergence (MACD) remains firmly bullish, although the RSI shows signs of turning downwards from above 70. Momentum appears to be flattening, suggesting a potential consolidation ahead. Despite this, the negative tone of the Dollar and the ongoing bullish impulse hints that the rally could still have room to extend further north, particularly if the price consolidates above 0.6720. On the downside, a break below 0.6680 would result in a loss of momentum for the Aussie. A correction could extend to near 0.6615 without changing the bullish short-term outlook. Support levels: 0.6680 0.6620 0.6585  Resistance levels: 0.6740 0.6760 0.6795

The Bank of England and the European Central Bank both left rates on hold on Thursday but unlike following the announcement of their counterparts in the US, there were no fireworks. Of course, it's worth noting that the press conference is yet to happen so fireworks may fly when President Lagarde speaks but the announcement and statements that followed it didn't give investors much to get excited about. The one point of note was the reference to inflation projections being lower than in September "especially for 2024" which may be a precursor to Lagarde insinuating then the next move could be lower in the new year. How early may determine whether markets are forced to pare back very aggressive positioning. The Bank of England announcement was arguably more notable despite offering no forecasts and there being no press conference after. The voting was unchanged from the last meeting, with three policymakers backing a rate hike, very much running counter to the message from the Fed last night. Perhaps armed with new projections in February the message from the BoE will be very different but at this moment, that was rather more hawkish than many will have expected. And the statement still referencing higher for an extended period and higher inflation compared with other major advanced economies was clearly more hawkish. 

XAU/USD Current price: 2,039.17 The US Dollar remains pressured by Fed-inspired optimism. The Bank of England and the European Central Bank stayed pat on rates, as expected. XAU/USD is overbought in the near term but could still reach higher highs. Gold prices maintain the positive momentum, with XAU/USD trading at around $2,040, not far from an intraday high of $2,047.90. The bright metal benefited from the broad US Dollar's weakness, resulting from the Federal Reserve (Fed) monetary policy announcement. The central bank anticipated three rate cuts in its Summary of Economic Projections (SEP) vs two in the previous dot plot. Furthermore, Chair Jerome Powell said that rate cuts appeared on the discussion table, although pledged to keep rates higher for longer as usual. But optimism did not come exclusively from the Fed. The Bank of England (BoE) and the European Central Bank (ECB) announced their respective monetary policy decisions on Thursday and also decided to remain pat for a third consecutive meeting. Without explicitly stating so, central bankers have ended monetary tightening. Speculative interest has started betting on pivots and rate cuts, and the latest announcements back such beliefs for 2024. The emergent optimism weighed on the US Dollar despite upbeat United States (US) data. The country reported Retail Sales were un 0.3% MoM in November, better than the 0.1% decline expected. Also, Initial Jobless Claims printed at 202K in the week ended December 8, below the 220K forecast. XAU/USD short-term technical outlook The daily chart for the XAU/USD pair supports a continued advance. The pair is firmly up for a second consecutive day, extending gains beyond a bullish 20 Simple Moving Average (SMA), currently at around 2,014. The longer moving averages, in the meantime, slowly grind north far below the shorter one. Finally, technical indicators advance modestly within positive levels, showing no signs of upward exhaustion. In the near term, and according to the 4-hour chart, the risk also skews to the upside. XAU/USD extended its rally beyond all its moving averages while technical indicators pick up within overbought readings, in line with higher highs. Support levels: 2,027.55 2,014.10 2,003.90 Resistance levels: 2,047.90 2,065.60 2,081.10