Investor Read Ahead: Dovish Fed Hopes Fuel Anti-Dollar Rally – Why December 3rd Was a High-Probability Risk-On Day

Today's session was defined by the continuation of a powerful, central theme: the US Dollar (USD) is weak. Disappointing employment data (specifically the ADP report) convinced the market that the Federal Reserve will likely cut interest rates sooner and more aggressively.

This overwhelming expectation of easy money created a massive wave of selling in the dollar and aggressive buying in almost everything else—a classic Risk On / Anti-USD sentiment day.

Our job is to look past the day’s headlines and apply our systematic method of analysis to identify where the smart money is truly heading. By analyzing the flow between key commodities and currency pairs, we can determine the probability of higher values for risk assets going forward.

While we don't have explicit data on equities and bonds, the broad market reaction confirms the dominant bias: a bullish environment for most non-USD majors and commodities. The technical action across all major pairs and commodities signals that the overall environment favors Risk On.

Let’s break down the evidence from the commodity and forex markets and map out the key technical levels we need to watch.

Section 1: The Macro Engine – Why Risk is On

The foundation of the day's movement was the broad-based US Dollar selling. This selling pressure originated from weak US economic data, which fueled expectations that the Fed would adopt a "dovish" stance—meaning they would favor lower interest rates.

When investors lean away from paper assets like the Dollar, they often favor hard assets. This dynamic—USD weakness leading to commodity strength—creates a clear bullish environment for precious metals and other commodities. This is the primary driver behind the overall Risk On sentiment.

Section 2: Gold – The Healthy Pullback

Gold (XAU/USD) experienced a moderate correction today, consolidating near the $4,200 level after a strong recent surge. Some profit-taking occurred, which is a normal, healthy event ahead of major US employment data releases.

Despite this short-term pullback, the long-term technical structure remains definitively bullish.

• Moving Averages: Prices are holding well above the longer-term moving averages (50-day and 200-day), which confirms the dominant uptrend. Shorter-term averages (like the 5-day MA near $4205) are temporarily acting as minor resistance. When prices are above the common moving averages, and the overall environment favors risk on, investors should look to go long.

• Momentum Indicators: The Relative Strength Index (RSI) is pulling back toward the midpoint (near 48–50), cooling off from recent "overbought" territory (above 70). This is actually a positive sign for a bullish continuation, as it shows momentum is easing without reversing the primary trend. The MACD suggests a loss of upward momentum, indicating a short-term sell signal, which confirms this consolidation phase.

Key Levels for the Gold Trade:

The critical short-term horizontal support zone lies between $4,200 and $4,180. A break below $4,180 could lead to a deeper correction. For long-term bulls, the critical line to hold is the intermediate support at $4,110–$4,100, which aligns with the 20-day Moving Average.

On the upside, immediate resistance is found between $4,235 and $4,250. Clearing this resistance confirms the short-term correction is over and opens the door to the major psychological barrier at $4,300. A decisive breakout above $4,300 would confirm a new, higher leg in the uptrend.

Trader Action: Given the strong long-term structure, traders should look to buy the correction reversal. An entry zone between $4,180 and $4,200, with a stop below $4,150, is suggested, targeting $4,250 and $4,300. Selling (shorting) is generally discouraged in this strong uptrend, but short-term scalp sellers might look to enter around $4,230–$4,250 if resistance holds.

Section 3: Crude Oil – Maintaining Upward Trajectory

Crude Oil prices are also exhibiting signs of strength, maintaining an upward trajectory. This is supported by the overall positive sentiment driven by the expectation of a weaker US Dollar.

The technical outlook for Crude Oil suggests a bullish continuation, with prices likely trading above key short-term moving averages. Brent Crude, for instance, is moving toward $64.50. Although our analysis framework requires looking at the relationship between energy and equities to determine a signal, the strong move in crude, coupled with the anti-USD Risk On theme, suggests fundamental strength is present in this hard asset.

Section 4: Forex – Confirmation of Anti-USD Risk On

The Forex market provided the clearest confirmation that the session was dominated by Risk On and Anti-USD sentiment.

EUR/USD (Euro/US Dollar)

The EUR/USD pair extended its rally, marking a streak of bullish sessions and breaking above several short-term resistance levels. The pair is exhibiting strong bullish momentum across multiple timeframes.

• Technical Read: Price is trading well above all major moving averages, and momentum indicators (RSI and MACD) are trending higher in bullish territory, confirming the strength of the move.

• Support/Resistance: The area between 1.1600 and 1.1630 (previous consolidation high) is now strong support. Immediate resistance is between 1.1680 and 1.1700.

Trader Action: This pair signals a Strong Buy. Buying on a pullback/retest in the 1.1600–1.1630 range is recommended, targeting 1.1700 and 1.1750. Counter-trend selling should be avoided due to the strength of the daily trend.

USD/JPY (US Dollar/Japanese Yen)

The USD/JPY pair plummeted as the US Dollar weakness accelerated, confirming that the forecast for this pair is increasingly negative. This bearish move is compounded by the narrowing of the US-Japan yield differentials.

• Technical Read: Momentum indicators (RSI and MACD) are trending sharply lower, reflecting high bearish pressure. The MACD histogram is deepening in negative territory.

• Support/Resistance: The pair is at a pivotal confluence zone of major support between 154.50 and 155.00. Breaking this support would confirm a significant drop, opening the door to the next major level at 153.50.

Trader Action: Selling (shorting) is the favored trade here. Traders should look for a confirmed break below the pivotal 154.50 support, targeting 153.50 and 152.00.

Other Pairs

Other major pairs, including the British Pound/US Dollar (GBP/USD), Australian Dollar/US Dollar (AUD/USD), and New Zealand Dollar/US Dollar (NZD/USD), are all exhibiting Strong Buy signals against the US Dollar, further confirming the dominance of the Risk On / Anti-USD trend.

Conclusion and Strategic Outlook

The market is exhibiting a clear Risk On / Anti-USD sentiment. Weak US economic data has fueled expectations of a dovish Federal Reserve, leading to broad-based US Dollar selling.

Our analysis framework confirms the bullish stance, as prices for key assets are mostly above major moving averages and the overall environment favors risk-on.

Trader Action Plan:

1. Look to Go Long: Given the strong Risk On bias and the fact that prices are above major moving averages, investors should look to go long on non-USD assets, using pullbacks to establish positions.

2. Monitor the Correction: Gold is in a healthy short-term consolidation, but the long-term bullish trend remains intact. A close above $4,235 would suggest the correction is definitively over.

3. Watch the Pivots: The USD/JPY pair is at a critical juncture; a break of the 155.00 support will confirm a significant bearish move and strengthen the overall Anti-USD narrative.

4. Beware the Reversal: Traders must closely monitor the release of additional US economic data tomorrow. Any surprise strength in the data could challenge the dovish Fed narrative and trigger a rapid short-squeeze in the US Dollar, which would immediately invalidate the current bullish commodity and bearish USD signals. This highlights the need for tight stops and disciplined risk management, even when the market bias is strong.