The dollar slid against major currencies as U.S.-China angst nL1N2FS0LB helped prevent 10-year Treasury yields from testing their August highs ahead of Thursday's speech by Fed Chair Jerome Powell, which is expected to signal a strategic dovish policy shift.
The Commerce Department's addition of 24 Chinese companies to the entity list helped quash the dollar's attempt to rally on solid durable goods orders nAQN030KF8.
Powell is expected to affirm the need for rates to remain low, possibly through average inflation targeting.
Markets see that as crucial to reduce the real-interest-rate cost of coronavirus-related deficit spending -- and also a weight on the dollar and boost for financial and hard assets nL1N2FS14C.
EUR/USD hit its 1.1773 low on EBS nL1N2FS1F2 shortly after the durable goods release and the U.S.-China headlines but proceeded toward Tuesday’s 1.1843 high by late-U.S.
trade, leaving a long tail and indecisive doji on the daily candlestick.
It marked a third session inside Friday’s 1.1754/883 range in consolidative price action.
Weighing on the dollar, 10-year Treasury yields failed to reach August’s 72.7bp high by the 50% Fibo of the June-August decline at 73.1bp.
A second stellar Treasury note auction in as many days sent yields lower in the afternoon, though a broader bottoming pattern from pandemic lows is evident.
Though EUR/USD remains encumbered by near-record net speculative IMM longs, a reversal of the uptrend will require the string of eight higher weekly lows, last week’s at 1.1754, to be broken.
The stocks-tracking pound nL1N2FS1EC rose back to the upper 21-day Bolli band by 1.3220, near August’s 1.3266 recovery peak, helped by EUR/GBP's drop below the daily cloud bottom for the first time since June 2.
Sterling has been ignoring the looming October deadline to clinch a Brexit deal, with talks next week in question nP6N2D402F.
USD/JPY fell with the dollar, failing to reach key 55-day moving average resistance at 106.64 and subsequently probing 21-DMA support by 105.94.
Japanese Prime Minister Shinzo Abe's press conference on Friday covering his health nL4N2FS12T looms, but USD/JPY is being driven by Treasury yields and Powell anticipation nL1N2FS1NH.
Reaction to Powell will be closely watched in FX risk gauge AUD/JPY, which remained at the top of its rising range nL1N2FS14C and seeking a breakout catalyst.
Dollar weakness and Hurricane Laura in the Gulf of Mexico -- headed for Texas and Louisiana -- underpinned energy prices nL1N2FR149.
Silver and gold rebounded as potential pre-Powell risk hedges.
Thursday's weekly jobless claims take the spotlight after wildly divergent August Markit PMIs and consumer confidence.
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