The dollar won a reprieve on Thursday after a surge in Treasury yields reversed the euro's breakout higher and fueled a late recovery in the U.S. currency, though the final leg of its rebound might not be cause for celebration.
Treasury yields got an initial boost after U.S. jobless claims nS0N2JQ00R and durable goods orders nAPN047PWD beat forecasts.
Though claims were taken with a grain of salt due to weather and other uncertainties the data still helped nudge yields above the estimated 1.48% S&P 500 dividend yield.
This added to the pain for stocks, offering safe-haven support to the dollar, but then a very poor reception to the Treasury's auction of 7-year notes sent yields rocketing briefly above 1.60%, according to Tradeweb US10YT=TWEB, before subsiding.
EUR/USD gained speed in early trading after clearing the daily cloud top, the B-wave high from Jan.
22 and the 61.8% Fibo of this year's ABC retreat at 1.2170/90/87, sparking a run to 1.22435 on EBS.
Prices look headed for a retest of January's peak nL1N2KV1RH.
But EUR/USD gains in U.S. trading were curtailed by surging Treasury yields and the collateral damage to equities.
EUR/USD's early rise, helped by friendly February euro zone sentiment nL8N2KV46A, barely took notice of ECB officials attempts to talk down yields nL8N2KV1RF.
Ten-year Bund yields spiked nearly to last year's highs, playing catch-up with soaring Treasury yields, which surged to pre-pandemic levels, undeterred by the Fed's complacency regarding inflation and asset valuations nS0N2JQ00R.
The euro also reversed its relentless retreat against sterling and extended its surge against the yen to its highest since November 2018.
Sterling showed signs of mortality after Wednesday's crescendo close to 2018's post-Brexit referendum vote high left it extremely overbought heading into month-end.
Upwardly spiraling Treasury yields and their fallout in stocks, which cable is positively correlated to, drove cable below the last two days' lows and the 50% Fibo of its 1.3830-4240 two-week advance.
USD/JPY made new highs for the year as the yen was sold far and wide early, but gains came mostly on Treasury-JGB yields flying up to pre-pandemic levels.
The negative feedback loop between rising Treasury yields and falling stocks pulled USD/JPY down from its 106.40 session high on EBS, which finally prompted a sharp pullback in Treasury yields from their highest in over a year.
A USD/JPY close above 106.08, the 38.2% Fibo of the pandemic fall, hangs in the balance, with 107.155/32 upside targets if accomplished nL1N2KV298.
AUD/USD and other high beta currencies reversed early gains, or, in the case of emerging markets currencies, simply extended losses that surging U.S. and European yields fostered.
personal income, consumption and the core PCE top Friday's economic bill, with Chicago PMI also in the mix.
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