The FOMC Minutes for the latest July 31-August meeting came out at 2:00PM EDT today. The market appears to be interpreting it as a sign of possible QE, at least as can be seen in the currency markets, where the USD softened across the board. QE basically increases the money supply of USD, and thus is seen as USD-bearish.

added after initial post: Just after posting this, I wanted to add: Seems like JPY, Commodities are getting inflows. But not risk-on as shown in SP500. This is a risk-off, switching safety from USD to JPY type of dynamic.

Gold often rallies sharply on QE expectations. After the FOMC minutes came out, a near-term consolidation turned up with a break to new highs since early May, closing in on the 1650 handle. A pop above 1650 should reflect the market truly pricing in this heightened expectation of QE. However, falling below 1635 should be a sign of false initial reaction.

EUR/USD also rallied above near-term consolidation early during the US session, pushing above 1.25.

GBP/USD picked up speed after losing steam at a triangle breakout point.

USD/JPY was already sliding in a bearish channel, but only picked up bearish momentum in the 1H chart after the release of the FOMC minutes. The near-term level to watch for support is around 78.80.

The USD also fell against the commodity dollars, AUD, CAD, and NZD. You definitely don't see the moves in the same direction in JPY-crosses.

Now the question is: will this initial reaction continue on the back of USD-weakness? A look at the S&P500 might provide some clues. As you can see, the initial reaction is having trouble following through, even within the first 30 minutes of the release. If the index does indeed pop up above 1411.15, we have some promise of a risk on follow-through, which should be correlated with USD-weakness. However, if the index holds below 1411.15 and falls below 1400, the market is showing disbelief of this heightened QE expectation.

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of rex News, Analysis, Education, Videos, Charts, and other trading resources.

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