The dollar extended its broad recovery after an unexpected drop in German retail sales nL8N2FZ0Y6 overshadowed dour U.S. ADP data nAQN031LNU, pushing EUR/USD to new lows for the week and pulling the pound nL1N2FZ0LQ and aussie nL1N2FZ1GZ with it.
The Fed's Beige Book painted a mixed picture of pandemic-linked labor and price pressures, and economic activity increasing modestly in most districts, though well below pre-crisis levels.
The dollar’s recovery from deeply oversold and key support levels tested Tuesday nL1N2FY1HX is supported by the slowdown in new U.S. COVID-19 cases nL4N2FZ3IO -- in contrast to Europe's rise nL8N2FZ4HJ -- diminishing pandemic-related downside economic risks.
While the Fed has made clear the path of the pandemic is paramount, they also continue to press for more fiscal support nL1N2FZ1DI as prior backstopping has lapsed.
After failing to break out above 1.20 and rejection near the downtrend line across 2011 and 2014 peaks -- amid overbought signals and record IMM net speculative longs -- EUR/USD slid near the rising 30-day moving average at 1.1810.
The 30-DMA caught last week’s 1.17625 low on EBS and looks pivotal on a closing basis.
EUR/USD’s posted higher weekly lows in each of the past nine weeks.
August's 1.1695 low and the 38.2% Fibo of the rally from the June 23 pullback low to the 1.2014 peak at 1.1691 are the bigger issue for speculative longs if the higher weekly low pattern is broken.
The next likely target if those props don’t hold is 1.15.
The focus after ADP is weekly jobless claims and Friday’s NFP report, with a strong glance at ISM services, particularly the employment index, on Thursday.
Sterling found support at the 1.3284 swing high from Dec.
31 nL1N2FZ1GG after Tuesday’s failed attempt to retest 2019’s 1.3516 peak.
Dour Bank of England member comments nL1N2FZ1GG and a reminder of the EU-UK Brexit talks impasse nL8N2FZ3ET were in the mix, though moves remain mostly dollar-driven.
USD/JPY’s dollar-led boost nL1N2FZ1Q2 to the daily cloud base at 106.31 was aided somewhat by Chief Cabinet Secretary Yoshihide Suga confirming expectations he will vie for outgoing Prime Minister Shinzo Abe’s position, which he’s seen winning, suggesting a continuation of yen-damping Abenomics policies nL4N2FZ0RR.
USD/JPY bulls may need the remainder of this week’s key U.S. data to come in near or above expectations to have a shot at the recent range tops by 107 nL1N2FZ1Q2.
The dollar’s recovery sent commodity prices tumbling, along with commodity and emerging market currencies.
Precious metals fell even as longer-term Treasury and Bund yields slid and stocks rallied, affirming the negative correlation to the dollar.
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