In early Asian trading on Thursday (August 17), the US dollar index rose to 103.49, US Treasury yields hit their highest level since October, and China's weak economy suppressed Asian markets. The FOMC meeting minutes generally showed that inflation rebound would consider further interest rate hikes, and the Fed hawks won a big victory, with most members agreeing to raise interest rates. Gold and Bitcoin suffered a sharp sell-off, with gold prices falling to $1,892 and bearish signals amplified, and Bitcoin fell to $28,732, with shorts gaining the upper hand.

The minutes of the Federal Open Market Committee (FOMC) meeting showed that some members are still concerned about inflation risks. Two members expressed a preference to keep interest rates unchanged at the July meeting. Overall, the minutes showed that the possibility of further rate hikes is still being considered if inflation rebounds.

The dollar continued to strengthen amid risk aversion and rising Treasury yields. The dollar index hit its highest level since June, near 103.50, and extended its upward trend to five days. Despite this rebound, the dollar's momentum remains firm. Stocks on Wall Street turned decisively to the downside during Wednesday's trading session. The Dow Jones fell 0.52% to its lowest closing price in a month. In the bond market, traders interpreted the hawkish message. The 10-year Treasury yield closed at 4.26%, the highest level since 2007.

The yield on the policy-sensitive two-year Treasury note rose 0.02 percentage point to 4.98%. As yields rise, Treasury prices fall.

It is worth noting that while a "majority" of senior voting members favored further rate hikes, there were some notable dissenters. Philadelphia Fed President Patrick Harker, a voting member, said: "I believe we may have reached a point where we can be patient and keep rates steady."

In addition, the presidents of the Boston and Atlanta Federal Reserve banks both revealed that they favored an extended pause. Boston Fed President Susan Collins said last week: "The risk of doing too much has increased relative to the risk of not doing enough and is closer to equilibrium."

Other Fed members expressed concern about the real possibility that underlying price pressures could become more persistent as a direct result of a tight labor market, which would allow workers to bargain for higher wages, making it more difficult to mitigate inflationary pressures.

Also in an interview last week, Richmond Fed President Tom Barkin expressed uncertainty about whether inflation can reach the Fed's 2% target. He explained: "If the economy is as weak as you expect, if it's not, then I do want to know the path of policy."

The idea of ​​further rate hikes was underscored by Minneapolis Fed President Neel Kashkari, who said the Fed is “not ready to declare victory in the fight against high inflation.”

The British pound outperformed, boosted by positive UK inflation and retail sales data. GBP/USD retreated from its highs but remained above 1.2700. However, the strength of the US dollar limited the upside potential of the pair.

EUR/USD fell below the 1.0900 level, increasing bearish pressure and closing at its lowest level in a month. Despite the positive Eurozone data, it did not have a decisive impact on the euro, with Eurozone trade balance data scheduled for release on Thursday.

USD/JPY rose for the eighth straight day, climbing above 146.00, as the yen's depreciation drew market participants' attention to the possibility of intervention by Japanese officials.

Gold continues to fall below 1900 trend reveals key support level

Bruce Powers, an analyst at FXEmpire, said gold prices continued to face downward pressure, falling below Tuesday's low of $1,896. This is the eighth consecutive day of lower daily highs and lower daily lows. Earlier in Wednesday's session, gold prices rose, testing the 200-day moving average support level and encountering resistance at the day's high of $1,907. The 200-day moving average is at $1,908, and Wednesday was the first day that the entire price range was below the 200-day moving average.

The downtrend retracement from the recent swing high remains intact and gold looks to be heading towards the swing low support area from late June at $1,893, with prices likely to follow lower. Wednesday's price action relative to the 200-day moving average was a classic bearish action, suggesting that the downtrend will continue. The 200-day moving average has been a possible support area, with gold breaking below it two days ago. A successful test of resistance on Wednesday and the subsequent drop to a new trend low later in the session confirmed the bearish action, with a daily close below the June swing low further confirming the bear trend.

At the beginning of this week, gold prices broke below the July low of $1,903, triggering a monthly bearish signal, and then closed below the July low of $1,903. In addition, the 10-month moving average of $1,901 has been acting as a support area since gold prices returned to $1,901 in December 2022. As there were no signs of subsequent strength, the bearish signal looks valid. It provides further supporting evidence for a deeper pullback.

Several potential support areas are marked on the chart to provide guidance if gold prices continue to fall. The first is around $1892, marked on the chart by a red horizontal line. This price area has been recognized by the market several times over the past two years and is very close to resistance at the August 2011 peak. Below are two areas of Fibonacci confluence that may present support.

The first one starts from around $1871 and goes all the way to $1864. It includes a Fibonacci retracement and two extensions. Price levels using the same measurement make up the second Fibonacci price zone, which runs from around $1839 to $1834.

Will Bitcoin face a bigger sell-off?

CoinTelegraph pointed out that Bitcoin had previously risen above the 20-day exponential moving average of $29,383, but the long shadows on the candlesticks showed a sell-off at a higher level. The price of the currency is still below the 20-day moving average, and the relative strength index (RSI) is in the negative area. This shows that the bears have a small advantage and Bitcoin may slide to the important support level of $28,585.

If the price rebounds strongly above this level and rises above the 20-day EMA, it will indicate that Bitcoin might continue to range between $28,585 and $30,350 for a while.

If the bears sink and sustain the price below $28,585, the bears will have the upper hand and this could start a decline towards $26,000.