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Jan 11 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Up By Range Top On Careful Powell Comments

By Randolph Donney  —  Jan 11 - 02:25 PM

The dollar slid on Tuesday to a seven-session low, extending losses after Chair Jerome Powell's testimony during his renomination hearing failed to add new hawkish momentum behind expectations of Fed policy tightening this year.

EUR/USD ventured toward seven-week range peaks and sterling to its highest since Nov.
4, while USD/JPY was struggling to hold an earlier rebound.

Powell made the case for ending massive emergency easing measures but also that the economy probably remained in the same low-yield backdrop of the prepandemic era, reinforcing expectations that Fed hikes could peak at or below 2%, with balance sheet run-down doing the rest of the needed tightening nW1N2SF007.

Treasury yield curve flattening trimmed 1-2 basis points off longer-term yields and the front maintained three Fed rate hikes this year starting in March, so dollar softening is moderate so far.

EUR/USD gained 0.39%, with post-Powell gains rising above the daily cloud base and 55-day moving average ahead of November and December's range highs by 38.2% Fibo resistance at 1.1379.

Wednesday's U.S. CPI and Friday's retail sales report could decide whether EUR/USD's dwindling technical headroom leads to a bullish or bearish breakout of the ostensibly bear pennant formation.

Sterling was up 0.35%, with the post-Powell bounce to its highest since Nov.
4 a partnership between dollar slippage on softening Treasury yields and the risk-sensitive pound's gains on U.S. stocks gains due to receding fear of rising yields.

USD/JPY's 0.11% rise was limited by the pullback in Treasury-JGB yields after Powell's hearing versus haven yen weakness as stocks extended Monday's recovery from key supports, leading to an inside day after a four-session drop.

Prices need to close back above the tenkan and Dec.
5 and 6 lows at 115.55/625 on EBS to shake off the recent risk-off retreat nL1N2TR1Z9.

The Australian and Canadian dollars gained 0.6% and 0.8% against the U.S. dollar, with Canada getting added lift from a nearly 4% rally in WTI.

Emerging market currencies were a mixed bag, but aided by risk-on flows and higher commodity prices.

Bitcoin and ether gained roughly 2.5% and 5%, respectively, enjoying the brighter risk-taking mood.

Wednesday features U.S. CPI after China's CPI earlier in the day.
Core CPI is forecast up 0.5% month-on-month and 5.4% year-on-year, with the overall rate up 7.0% year-on-year, thus the Fed's belated attempt to tackle inflation.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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