The dollar soared on Thursday after strong jobs and services data pointed to a robust U.S. recovery and lifted Treasury yields as markets braced for another key employment report in the upcoming session.
Nearly a million new private sector jobs were created in May, jobless claims fell to pandemic recovery lows and ISM non-manufacturing beat forecasts with a record high nL2N2NK2B8.
EUR/USD fell 0.7%, breaking key 1.2133 support at the May 28 low and twin Fibo retracements, as well as the 30-day moving average and daily kijun line at 1.2140/26.
A close below that support would target the May 13 swing low and 38.2% Fibo of the 1.1704-1.2266 March-May rally at 1.2051.
Robust non-farm payrolls on Friday could put May's low and 50% Fibo at 1.1986/85 on the agenda.
If labor supply tightness constrains May payrolls growth, the market will look ahead to June and July reports, which will reflect the elimination of roughly 40% of supplemental jobless benefits by 24 states.
A bigger inflection point could come after all supplemental benefits expire in September and schools reopen for in-person learning.
News that President Joe Biden proposed scrapping a planned corporate tax hike to 28% in favor of a 15% minimum rate in a deal with Republicans to secure a $1 trillion infrastructure bill nL2N2NL1IP added to Treasury yield and dollar gains, while prompting a stocks recovery.
USD/JPY rose 0.63% and cleared last week's 110.20 recovery high, led by a sharp rise in Treasury-JGB yields spreads, particularly in the belly of the curve as eventual Fed tightening gets priced in.
With the U.S. economy recovering faster than it can handle and Japan's economy still flirting with recession, the macro case for USD/JPY retesting this year's highs is strong nL2N2NL1C4.
Sterling held up slightly better than the euro against the dollar, falling 0.51%.
But GBP/USD remains substantially below the 21-day moving average at 1.4122 for the first time in a month, clinging to range support just below 1.4100, with kijun and 38.2% Fibo support at 1.4026-28 next if the 21-DMA becomes resistance.
AUD/USD fell 1.3%, and other high-beta and commodity related currencies suffered from the rapidly rising dollar and Treasury yields and falling commodities.
Aussie broke below May range lows near the 61.8% Fibo of the April-May rebound at 0.7669, below the weekly kijun at 0.7690 for the first time since clearing it in April 2020.
Bitcoin and ether continued their recoveries from last week's and May's lows.
Fed chair Jerome Powell and ECB president Christine Lagarde both speak on Friday.
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