The dollar fell on Monday as central bank turmoil in Turkey nL1N2LK0A4 caused a flight to safe-haven U.S. Treasuries, pushing yields lower and depriving the U.S. currency of a key source of support for its recent rally.
Europe's close economic ties to Turkey had initially hit the euro, but higher yielding Treasuries ultimately benefited more than Bunds, which helped EUR/USD hold above 200-day moving average support.
Along with Turkey, EUR/USD's near-term outlook will depend on the U.S. Treasury's auctions of 2-, 5- and 7-year notes this week, which may benefit from below-forecast U.S. economic reports, including Monday's existing home sales nL1N2LI0CJ.
A poorly received 7-year auction last month triggered a surge in yields and the dollar.
The burden of proof remains on EUR/USD bulls while the euro remains below key resistance nL1N2LK1C8 due to broadening European lockdowns nL1N2LK1N1, the ECB's accelerated buying in its Pandemic Emergency Purchase Programme (PEPP) nAPN04A5HZ and risk of further rises in Treasury yields.
Sterling fell near the edge of up trend-line and 55-day moving average supports in early derisking and on lingering concerns regarding post-Brexit tensions between Britain and the EU over vaccine exports and the Irish border nL1N2LK19R.
The lack of progress for the EUR/GBP downtrend since Feb.
24 and Monday's range atop a bottoming 10-day moving average exposed the stretched conditions of sterling's rally this year.
USD/JPY inched lower amid the pullback in Treasury yields and the rebound in U.S. stocks, retesting the March 12 low at 108.50 and trading mostly below the cresting 10-DMA and tenkan.
USD/JPY is working through overbought conditions from this year's 6.6% recovery.
With the last of IMM spec yen longs cleared out last week, replaced by the biggest short in a year, the possibility of a short squeeze fueling further gains has been eliminated nL1N2LK1M2.
The recovery remains intact while above support in the 108.02-34 range, with broader upside targets closer to 110 in prospect if the Fed allows Treasury yields to normalize higher.
Cryptocurrencies were moderately weaker after Fed Chair Jerome Powell downplayed their importance as a means of payments, saying they are speculative assets and more akin to gold than the dollar nN9N2JO00D.
This as Russian and Chinese officials look for ways to reduce the dollar's global role and lessen the impact of Western sanctions nL1N2LK1T1.
The mid-week focus is on Fed Chair Powell's Congressional appearances Tuesday and Wednesday, and Treasury Secretary Janet Yellen on Wednesday nL1N2LH0ZHnL1N2LK1HN.
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