The dollar and yen surrendered some of their recent gains against the euro and sterling as stock markets rebounded off key supports and anxiety eased over potential ECB easing, Brexit nL1N2G60Z9 and coronavirus vaccines.
EUR/USD made a three-week low of 1.1753 on EBS and probed the uptrend line from May at 1.1758 before turning higher in early New York trading on a Bloomberg report nF9N2G6000 suggesting Thursday's ECB meeting may dampen concerns about more easing due to euro strength and August’s negative inflation reading nL8N2FY2F6.
The recovery was slowed by the 30-day moving average at 1.1830, which EUR/USD closed below on Monday for the first time since May.
A strong rebound in major stock markets after S&P 500 and Nasdaq futures found buyers by their 50- and 55-day moving averages nL1N2G60SI also reinforced EUR/JPY’s rebound away from the session's 124.43 low, exactly at June’s post-pandemic peak nL1N2G60VC.
Brexit headlines put pound traders through their paces, initially pushing it below August’s lows toward the daily cloud top and uptrend line from March at 1.2855/57.
Sterling then recovered to 1.3022 on news EU-UK trade talks would continue nL1N2G61IQnS8N2DM07Q.
Tuesday’s close below the 38.2% Fibo of the June-September advance at 1.3012 was nearly followed by a test of the 50% Fibo at 1.2867.
Sterling needs to close back above the 38.2% Fibo to give the rebound traction.
EUR/GBP’s rebound stalled near repeated July highs as the Brexit threat ebbed.
The yen weakened as the stocks rebound diminished demand for safe havens, though the moves were merely corrections of this month’s drops in the crosses.
USD/JPY hit a six-session low before rebounding with stocks and Treasury yields, but it may be up to the Fed at next week’s meeting to break the dollar’s 105-107 August-September range nL1N2G619B.
The rebound in riskier assets, including commodities, gave aussie, high-beta and emerging markets currencies a boost, allowing AUD/USD to retrace Tuesday’s tumble along with AUD/JPY.
USD/CAD fell back amid the dollar’s retreat, rebounds in oil and gold and a steady BOC meeting.
The immediate market focus is S&P and Nasdaq futures seeking a close above Tuesday’s highs after they bounced away from 50- and 55-day moving average supports.
Thursday features the ECB meeting with investors likely to scrutinize their comments in light of recent euro gains and deflation warnings.
jobless claims are expected to show a continuation of the gradual fall from unprecedented heights.
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