The US dollar index (DXY) has shed another 1.2% this week, trading near 100.50 as we approach the Thanksgiving holiday, marking its third consecutive monthly decline. The primary driver remains the growing conviction among traders that the Federal Reserve's November policy meeting minutes—released earlier this week—cement a prolonged pause that could extend well into Q2 2026. With October PCE data showing inflation stubbornly hovering at 2.4% and the labor market exhibiting clear signs of cooling, Fed officials have adopted an explicitly patient stance, contrasting sharply with more active central banks elsewhere.
Currency Pair Analysis:
- USD/JPY has plummeted to 142.30, its lowest level since August, as the Bank of Japan's November policy meeting revealed a surprisingly hawkish tilt. Deputy Governor Shinichi Uchida's comments about "examining sustained wage growth momentum" have markets pricing in a 70% probability of a 15bp hike in January 2026. Technical support lies at 141.50 (200-day MA), with resistance now at 144.80.
- EUR/USD has surged past 1.1150, buoyed by resilient Eurozone PMI data and ECB President Lagarde's indication that the central bank may pause its easing cycle after November's 25bp cut. The pair eyes 1.1230 resistance, a break of which could open the door to 1.1400 in Q1 2026.
- GBP/USD trades at 1.3050, supported by the BoE's more hawkish November meeting where two members voted to hold rates steady, citing persistent services inflation at 4.8%.
Commodity Markets Respond to Dollar Weakness and Geopolitical Tensions:
Gold has reclaimed the $4,240/oz level, up 3.5% in November, though notably below September's peaks. The rally is driven primarily by real yield compression, with 10-year TIPS yields falling to 1.85%, rather than pure safe-haven demand. Meanwhile, WTI crude oil has jumped to $88.50/barrel following the latest OPEC+ meeting, where the group unexpectedly maintained production cuts through Q1 2026 and added a 500k bpd voluntary reduction from UAE due to Middle East supply disruption fears. Bitcoin has decoupled from traditional risk assets, climbing to $48,200 as institutional inflows into newly approved spot ETFs reached $1.2 billion in the first three weeks of November alone. The crypto asset appears to be carving out its own narrative as a "digital gold" hedge against potential dollar debasement scenarios heading into 2026.