The dollar followed Treasury yields higher on Friday after U.S. employment data shattered consensus forecasts nL2N2L23EI, building on gains that came after Fed Chair Jerome Powell's bullish comments for the U.S. currency on Thursday nS0N2JQ018.
Louis Fed President James Bullard echoed Powell's comments nN9N2JO003, while the payrolls punch knocked EUR/USD to its lowest since late November after taking out February's lows beforehand.
Most of the dollar's gain came before the jobs report, which was almost too good, dimming demand for dollar as a haven nL2N2L31H8.
The large 513,000 rise in services jobs showed the upside potential for that decimated sector as pandemic fears subside, though without pressuring average earnings growth much nAQN03VQTA due to low pay in that sector.
Treasury yields backed off intraday highs not far from last Thursday's pandemic recovery peak, allowing the somewhat oversold EUR/USD to steady from a 1.1893 nadir near the 61.8% Fibo of its November-January rise at 1.1887.
Because the spread between Treasuries and Bund yields is expected to widen further in time, particularly as the ECB signals its unease with rising yields, in contrast with the Fed, EUR/USD could test November's low by 1.1600 nL2N2L31JZ.
USD/JPY's staggering 3.5% eight-day surge to Friday's 108.645 peak on EBS, its best since June, left it ripe for consolidation after the initial bullish reaction to the U.S. jobs data faded.
The bulk of the day's highs came on the sustained reaction to Powell and after Governor Haruhiko Kuroda extinguished speculation the BOJ might widen its 10-year JGB yield trading band, the 20bp top of which was nearly reached last week.
Extension of the pandemic lockdown in the Tokyo region was also a reminder of how far ahead the U.S. is in vaccine acquisition and deployment.
USD/JPY corrected down to the 61.8% Fibo of the pandemic downtrend at 108.23 that it surged past earlier in the day amid daily and weekly RSIs above 80 and 70 respectively.
The ability of U.S. stocks to rally after the jobs data trimmed haven dollar bids that have added to its allure from rising Treasury yields.
Sterling, which last month got close to its post-Brexit referendum peak at 1.4377 before backing off hard to correct overbought daily and weekly studies was threatening to close below its weekly tenkan line at 1.3846 for the first time since early November.
But prices are still above key support from the 55-day moving average and up trend-line from November at 1.3708/27 nL2N2L31C5.
The fleeting rise in Treasury yields after the jobs report and rebound in stocks allowed AUD/USD and other high-beta currencies to reclaim some of their early losses.
But Aussie is still well below the pivotal 55-day moving average at 0.7717 by its 0.7727 high.
The relative risk-on response to the jobs data and Treasury curve flattening is unlikely to derail the broader reversal of the dollar's pandemic downtrend affirmed by this week's price action, even if it offers cause for a pause ahead of the ECB, Fed and BOJ meetings this month and during next week's lull in major U.S. economic releases save for Wednesday's CPI.
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