The dollar surrendered another attempt at a recovery on Wednesday as Fed Chair Jerome Powell reinforced the previous session's dovishness by saying it may take more than three year to get inflation above 2% nS0N2JQ00R.
This, combined with aggressive New York Fed buying of 20-year notes nIfp35DNC1, yanked yields off session highs, bringing the dollar along with them.
EUR/USD recovered from a low of 1.2109 on EBS but remained below Tuesday's and the Jan.
22 swing highs at 1.2180/90 and the 61.8% Fibo of the January-February drop at 1.2197.
The pullback in 10-year Treasury yields was aided by the fact that the session peak of 1.43% ran into resistance in the form of the September 2019 swing low that only gave way last February as the pandemic panic began.
And 30-year Treasury yields surged to within 9bps of last year's high.
The question for FX is whether these Treasury hurdles are temporary, given that much more aggressive upside technical targets exist nL1N2KU1KK.
The pullback from the highs in Treasury yields also allowed stocks to extend their recovery from Tuesday's slide, dimming demand for the safe-haven dollar.
Over time, though, if Treasury yields continue to rally, the euro, yen and Swiss franc longs against the dollar could be in trouble nL1N2KU1MD.
The franc and the yen, both with negative short-term government debt yields and previously seen as havens, have been slammed midweek, as surging Treasury yields, including TIPS, made the dollar more attractive.
USD/JPY spiked up to 106.105 from Tuesday's 104.92 low, which held last week's low.
But prices got heavily overbought intraday and fell back with Treasury yields giving bulls a second chance to buy at Tuesday's 105.84 high.
A close above February's high would likely squeeze some IMM spec shorts and target the 50% Fibo of the pandemic downtrend at 107.115 and the 161.8% Fibo off January's base at 107.32 nL1N2KU1W8.
Sterling continues on its quest to retest 2018's post-Brexit referendum high at 1.4377.
As that major objective comes closer, with prices hugely overbought, there will be growing temptation to book some profits, particularly ahead of month-end nL1N2KU1J8.
USD/CHF's nasty two-day short squeeze above this and last year's highs to 1.1056 finally found resistance at the prominent October 2019 high at 1.1058.
Resumption of the rally in commodities underpinned linked currencies such as the aussie and CAD.
Bitcoin and ethereum rebounded after their major setbacks to start the week.
Thursday features jobless claims and durable goods orders.
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