The dollar played defense after an upbeat jobless claims report failed to inspire durable gains as the build-up to Friday's crucial non-farm payrolls report and coronavirus fiscal relief talks clouded the outlook.
Investors used EUR/USD's pullback after the jobless claims beat as a buying opportunity on the assumption that falling U.S. nominal and real interest rates and the Fed resolve to backstop markets with cheap liquidity nL1N2F815S could weigh on the dollar for sometime.
But, with EUR/USD struggling this week to extend July’s manic advance, a touch of pre-event risk and weekend caution was evident, even with traders eyeing a rise to 1.2000.
The unexpectedly low weekly claims nL1N2F71R8 wasn't sufficiently impressive to relieve pressure on Congress and the White House to extend fiscal supports nL1N2F71R8.
With the House and Senate far apart on key issues nL1N2F72Y7, President Donald Trump said he was continuing work on an executive order targeting eviction protections and unemployment benefits nL1N2F81AX.
Sterling struck new pandemic highs nL1N2F81JM against the dollar after the BoE held policy unanimously steady and took the possibility of negative rates off the agenda for now nL1N2F80V9.
Still, cable has yet to clear the 1.3200 pre-pandemic peak from March 9.
And the growing divergence between rising U.S. stocks and falling UK equities, Brexit risks, and overbought techs may hinder sterling as it approaches 2019’s highs.
USD/JPY held a tight, choppy range, briefly piercing the 50% Fibo of the 104.195-6.47 rebound from July’s low, at 105.33 in the wake of the claims report nL1N2F81O1.
Japan’s recovery has been less robust than most major economies, including the U.S., somewhat reducing the drag on the dollar from the lowest Treasury-JGB yield spreads in 40 years.
Nonetheless, USD/JPY remains in a downtrend on daily, weekly and monthly charts.
Since Monday’s peak briefly revisited the mid-July range lows, USD/JPY has followed the falling daily kijun and tankan -- last at 105.99/33 -- lower, unable to close beyond either line.
A close below the 50% Fibo at 105.33 could foreshadow a retest of key supports by 104, with 105 pivotal along the way.
AUD/USD rose about half a percent nL1N2F81LE despite Melbourne starting a six-week pandemic lockdown likely to hit the economy, as firm commodity prices and mining stocks added lift beyond the weakening U.S. dollar.
High-beta and emerging markets currencies diverged, as the Turkish lira’s meltdown to record lows continued, with ZAR, BRL and RUB also losing ground, while MXN recovered early losses to reach roughly unchanged.
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