The dollar rose on Wednesday, furthering its recent gains against most major currencies, though unexpectedly strong euro zone March PMI data nL8N2LM2F2 tempered its rise.
EUR/USD traded below its 200-day moving average for the entire session -- the first time since May -- after breaking it on Tuesday, and it set a four-month low of 1.1812 on EBS on ongoing angst regarding diverging progress out of the pandemic, though Germany dropped its short-lived plan for a stricter shutdown at Easter nL8N2LM2I4.
That resistance was put farther out of reach by U.S. March Markit PMI data coming in roughly as robust as forecast, with the services index at an 80-month high and the manufacturing index the second-highest on record nL1N2LM1I9.
A sharp pullback in U.S. durable good orders in February was largely disregarded as old, weather- and supply-chain skewed nL1N2LM18W.
The broader dollar index rallied right to its 200-day moving average at 92.60 today, a close above which could put September's high and other nearby hurdles in the mid-94.00s into play nL1N2LM1DV.
With little indication from Fed Chair Jerome Powell or Treasury Secretary Janet Yellen that monetary and fiscal stimulus will be constrained any time soon nS0N2JQ01P, the question for the market is whether the U.S. will continue its rapid vaccination process while avoiding a new wave of infections during spring holidays.
Sterling extended Tuesday's breakdown below its up trend-line from November, nearby 55-day moving average and March's prior low before a strong rebound in the UK PMI nL8N2LM2RO stopped the bleeding.
Nonetheless, technical damage has been done to the prior uptrend, which was so strong as to leave cable a bit heavy with speculative longs and perhaps too hopeful in predicting BoE normalization nL1N2LM1OV -- and too pessimistic about EUR/GBP due to disparate vaccine rollouts and benign Brexit views.
USD/JPY recovered from early weakness on the back of rebounding Treasury yields and a tad less demand for the yen as a haven versus other currencies as Western PMIs brightened the outlook.
But USD/JPY continues to consolidate this year's 6.6% rally and big flip from net spec shorts to long as prices were peaking this month.
A close above 109 is needed to indicate those headwinds are being overtaken by rising Treasury-JGB yield spreads and divergence between the U.S. and Japanese nZRN001E5U pandemic recoveries nL1N2LM24B.
Kiwi nL1N2LK2NX, aussie and other high-beta currencies licked their wounds from this week's tumbles.
The focus Thursday will be on U.S. jobless claims, the Suez Canal blockage nL1N2LM051 and President Joe Biden's speech outlining longer term fiscal plans.
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