The dollar slipped on Tuesday as Fed centrists' views, including Chair Jerome Powell nL2N2O31WU, helped ameliorate some of the wild taper tantrum pricing in Treasuries that had boosted yields and the U.S. currency following last week's FOMC meeting.
New York Fed President John Williams nL2N2O41E5 and San Francisco Fed President Mary Daly nS0N2LF01F also contributed to the more conciliatory central bank tone, helping the dollar index extend its retreat from Friday's peak, which had completed a measured objective off the May-June base.
Adding to the downward momentum, Tuesday's losses also pushed the dollar below Friday's 91.806 low, which is the 23.6% Fibo of the surge off the June 9 low.
EUR/USD rose above its analogous Fibo hurdle at 1.19345 on EBS.
EUR/USD gained 0.19% as Treasury yields fell back and Bund-Treasury yields spreads moved higher.
The 38.2% and 50% Fibos of the June 9-18 slide at 1.1989/20325 and the nearby 200- and 100-day moving averages at 1.1996/2034 are major resistance.
Last week's EUR/USD collapse was fueled by specs having expanded their net EUR/USD long positions just before the FOMC-induced price collapse.
The bulk of those and other recent longs are likely to have already been stopped out, putting the trading focus back on whether U.S. inflation pressures, such as in housing nL2N2O01ZE, will be transitory and the path toward pre-pandemic employment long enough to make tapering a late 2021 possibility, but rate hikes unlikely before 2023.
Global June PMI readings Wednesday might shed some light on recovery trends, but markets may have to wait until August or September before data and central bank policy updates could fuel a breakout of the 1.1704-1.2266 March-May EUR/USD range, though the bias is currently to sell rallies.
The yen lost 0.28% against the dollar and 0.46% versus the euro.
USD/JPY remains just below June and January's pandemic recovery peaks at 110.825/97.
The BOJ's limited room for policy maneuvering makes low and steady JGBs yields an attractive environment for yen-funded carry trades.
Sterling inched up 0.09%, with recoveries from Friday and Monday's 1.3791/865 post-Fed lows capped near Friday's 1.3944 high and the 100-day moving average there.
Very strong UK CBI data nL9N2M8012 were supportive, but Thursday's BOE meeting might need to lean hawkish to get cable back above nearby resistance and the daily cloud that now looms above.
The pullback in Treasury yields and rebounds in stocks and cryptocurrencies gave commodity currencies a leg up after getting clobbered after the Fed meeting and flirting with a further breakdown early on Tuesday.
Bitcoin was on the verge of a major technical purge before recovering early losses from below head-and-shoulders neckline support that found buyers near the 55-week moving average and before key Fibo support nL2N2O41GG, with a similar pattern in ether.
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