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Jul 15 - 05:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Falls On Risk Aversion As Powell Offers Little New

By Randolph Donney  —  Jul 15 - 03:01 PM

The dollar rose broadly on Thursday's global risk-off flows that also helped the yen and extended the drop in Treasury yields, while Fed Chair Jerome Powell's second-day testimony nL1N2OQ0ZD offered little new impetus.

Mixed U.S. data nL1N2OQ2HT was followed by further dollar gains, particularly versus high-beta currencies, as equities and Treasuries yields made new session lows.

If anything, Powell's testimony might be considered marginally less dovish -- thus supporting the dollar -- by saying the Fed was in active consideration of whether economy has achieved substantial further progress to reduce asset purchases, but interest rate did not react.

EUR/USD remained above the preceding two days' 1.1772 trend lows on EBS that probed a potential head and shoulders neckline across November and March lows, a break of which would target this year's low and 38.2% Fibo of the entire pandemic rally at 1.1704/695.

Sterling fell 0.32% after again running into sellers near 1.3900, despite expectations for BoE rate hikes rising on the back of strong UK data and hawkish BoE comments nL1N2OR1JE.
Those were partly offset by worries that full UK reopening could cause COVID cases to rebound enough that some restrictions might have to be reinstated.

But it was risk-aversion the drove the dollar higher versus the pound.

USD/JPY fell 0.1% as the haven yen was broadly bid.
An early break of 55-day moving average support was reversed by demand 109.715 on EBS, by the lower 21-day Bolli that also caught last Thursday's breakdown low.
Cloud top and July lows at 109.545/35 guard against a possible measured move to late May lows at 108.575 nL1N2OR1NL.

Friday's BOJ meeting will likely be a somewhat somber affair with little prospect of removing accommodations any time soon nL4N2OO3XU.

Aussie and CAD fell 0.83% and 0.77% versus the dollar amid the derisking and further weakness in oil, as well as mixed views as to whether the latest Chinese data point to a loss of growth momentum nL1N2OR054.

Bitcoin and ether continued to slowly grind lower toward May and June lows that look increasingly pivotal.

Thursday's mixed U.S. data nL1N2OQ2HT featured jobless claims showing the number of claims in all programs fell to 13.837 mln from 14.209 mln, partly reflecting the termination of extended benefits in several states, but also the vast number of jobs available.

The Empire and Philly Fed manufacturing indexes surprised on the upside and downside, respectively, while industrial production underwhelmed, with the microchip shortage hammering vehicle production and causing a 0.1% drop in manufacturing production.

Friday features U.S. retail sales and Michigan consumer sentiment and inflation expectations for July.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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