The dollar shed early gains on Tuesday, except versus the yen nL4N2E73WQ, as risk appetite recovered following unexpectedly strong U.S. consumer confidence, adding to bearish signals for the U.S. currency nL1N2E71H6 and lending a hand to sterling nL1N2E720R.
Quarter-end rebalancing flows affected trading, initially weighing on Treasury yields and stocks but reversing after the U.S. confidence news nL1N2E716G and into the London close.
EUR/USD rebounded after failing to break recent lows at 1.1190 and 1.1168 nL1N2E71V1, both by the 38.2% Fibo of the May-June advance at 1.1172, but the intraday rebound high of 1.1262 was capped by the 21-day moving average.
The euro probably benefited from Monday’s Blackrock II steer toward European equities and caution on U.S. stocks, but Airbus's AIR.PA announcement of 15,000 job cuts nASN0008SG dimmed the euro's allure.
So far, markets have interpreted rising U.S. COVID-19 cases nL1N2E71GY as mere bumps on the long road to recovery, which the Fed and Treasury still appear willing to backstop nW1N26P02D, though new legislation will be needed soon to keep certain supports in place nW1N2BC01KnW1N2BC01K.
Markets also looked past China’s sweeping new Hong Kong security laws nL4N2E73WQ that have elicited reprisals from the U.S. and other Western countries and could complicate already tense relationships with Beijing.
GBP/USD and GBP/JPY rebounded after key 76.4% Fibo supports held nL1N2E71BW and the risk-sensitive pound took a bullish cue from recovering U.S. equities after the consumer confidence beat.
USD/JPY built on Monday's rally off the May-June double-bottom base to the 100-DMA and 50% Fibo of the June slide at 107.93/96.
The 107.96 level is also the daily Kijun line, and a close above it would signal further upward retracements and a potential run to the cloud top -- which will be at 108.81 on Wednesday.
Japanese economic data nL4N2E647T should keep the BOJ in negative-rate and yield-curve-control mode and Japanese investors looking abroad for returns nL1N2E70V3.
The franc ran roughshod over the yen, dollar and euro after the Swiss May retail sales rebound, with EUR/CHF’s 0.5% drop perhaps setting the stage for even more SNB intervention to limit the currency's gains.
High-beta currencies were mixed, as rising metals prices and falling oil tugged in opposite directions.
July starts with Wednesday's U.S. ISM and ADP reports, followed on Thursday by a rare payrolls and claims double-header, as the markets and policy makers attempt to construct a pandemic recovery timeline.
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