The dollar suffered broad losses on Wednesday led by the euro and sterling nL1N2EF1O9, even without a strong rise in risk markets to motivate investors, as the currency's downtrend deepened in the wake of the resurgent U.S. coronavirus outbreak.
The wide distribution of the day's dollar decline against haven currencies, high betas and even some emerging markets marked a different and somewhat darker tone for the U.S. currency.
EUR/USD and the dollar index have both seen the 30-day moving averages attract increased dollar sales in recent sessions.
Dollar index selling has also been reinforced by this week’s so-called death cross, with the 50-day moving average having crossed below the falling 200-DMA.
EUR/USD needs to close above the 61.8% Fibo of the pullback from June’s high at 1.1325 and the 200-week moving average at 1.1335 on daily and weekly bases, respectively, to put in play June’s 1.14225 high on EBS and perhaps March’s peak and a Fibo target by 1.1500.
German Chancellor Angela Merkel, whose country holds the EU presidency, called on the bloc to swiftly reach a COVID economic recovery deal nL8N2EF3QA.
Optimism about sharing the cost of recovery is euro-supportive, but even core economies like Germany nL8N2EF157 may need help as major exporters face lingering foreign demand weakness and other headwinds.
USD/JPY succumbed to widespread dollar weakness nL1N2EF1TI after completely falling out its daily cloud to again probe 21-DMA support at 107.23.
A close below the tankan at 107.48 and the 21-DMA would open the door to the June 26 swing low and weekly kijun at 106.80/70.
USD/GBP gains received help from British Finance Minister Rishi Sunak’s recovery plan nL8N2EE3YG while shrugging off Merkel’s Brexit gloom nL1N2EF14S.
Traders will watch how the explosive rally in Chinese stocks responds to regulators naming 258 illegal margin lending platforms nL4N2EF30B given concerns about the speculative and leveraged nature of the recent surge nL1N2EF0TQ and after this week’s CSI 300 highs reached a Fibo-projected peak nL1N2EF0TQ.
Beyond the precarious U.S. pandemic news, attention is also being paid to Fed warnings about the need for more fiscal backstopping nL1N2EE1I3, even as some of their financial system support programs proved so effective their use has diminished nL1N2EF0SA.
For Thursday, the focus will be on weekly U.S. jobless claims which, unlike rapidly rebounding non-farm payrolls, have only marginally retreated from extremely elevated levels the past four weeks.
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