EUR/USD relinquished most of Thursday's earlier gains nL1N2FF1TD, encouraged by below-forecast jobless claims and higher Treasury yields, while sterling suffered similarly, with bulls surrendering the 10-day moving average yet again nL1N2FF1P7.
Caution proved the better part of valor for EUR/USD traders mindful of the record net-spec euro IMM long after initially shrugging off the claims data as influenced by Washington's failure to extend supplemental unemployment payments.
EUR/USD needed a close above 1.1800 to preserve the bullish momentum of the midweek rebound, though heavy 1.19 expiries block longer-term targets by 1.20.
A Friday close below last week’s 1.1695 low would darken the outlook and likely prompt more unwinding of longs.
Despite reasons to downplay data outperformance ranging from this week's claims and CPI to last week's July non-farm payrolls nL1N2F81T3nAPN0GPLF4 -- and the record refunding-influenced Treasury yields rise -- markets had time to discount those caveats beforehand.
However, concerns remain that U.S. President Donald Trump’s attempts to fill funding gaps caused by lawmakers' pandemic relief impasse nL1N2FE0ND will be insufficient nL1N2FC1Y2 to support consumers, pressuring the Fed to limit any markets angst.
Another concern is dollar-funded global asset inflation trades wobbling if rebounding Treasury yields, particularly after a poor 30-year auction, dim the TINA trade -- There Is No Alternative -- in riskier assets.
S&Ps weakened as 10-year Treasury yields spiked toward 73 basis points from last week’s low by 50bp, and 30-year yields up near 30bp from last week’s lows.
Friday’s retail sales may fail to capture pandemic relief issues sufficiently to shift market expectations, but another beat could challenge the dollar-negative lagging U.S. recovery narrative.
The dollar recovery, Treasury yields rise and stocks hiccup diminished early sterling gains, with GBP/USD again failing to challenge to March’s 1.3200 pre-pandemic peak.
USD/JPY ran into the 55-day moving average by 107 for a second day, with support near the 30-DMA by 106.50 and bullish tenkan cross above the kijun nL1N2FF19B.
The BOJ’s negative-rates workaround may nL4N2FD27I bolster Fed’s reluctance to try that policy, though yield curve control or average inflation targeting might be considered.
Oil weakened after the IEA lowered its 2020 demand forecast nL4N2FF19W, despite recent drops in U.S. inventories and increased fuel demand nL4N2FE1KH.
Gold rebounded further following Wednesday’s test of pandemic uptrend-line support.
Copper fell 3% and has been drifting lower since July 13 in a potential warning regarding the global recovery.
Other Friday data include industrial production and Michigan consumer sentiment.
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