The dollar erased its losses on Wednesday, pulling EUR/USD back from 33-month highs, as election results in the state of Georgia indicated the Democrats may be on the verge of gaining control of the U.S. Senate, boosting the chances of more fiscal stimulus in the Biden administration.
Though stocks retreated from their highs, currencies showed little initial reaction to news that the U.S. Capitol was put on lockdown as crowds protesting President-elect Joe Biden's victory breached security barricades while Congress was debating the certification of his electoral win over President Donald Trump nW1N2IO067.
Though the U.S. currency failed to make much headway after clawing back to flat on the day, its bounce highlighted the potentially difficult battle bears may face in trying to push the dollar index below nearby support at 88.25, at least until monthly RSI recedes from its most oversold levels since 2008 nL1N2JH1QK.
The dollar was little moved after Fed meeting minutes showed policymakers were nearly unanimous last month on keeping their bond-buying program unchanged while leaving a wide berth in the future to decide if and when changes should be made nW1N2HY01W.
EUR/USD retreated to near flat on the day after overnight gains produced a high of 1.2349 on EBS.
While the EUR/USD uptrend remains intact above the rising 21-day moving average at 1.2204, some overbought bearish divergence risk was creeping in on daily studies nL1N2JH1VP.
Oversold conditions were a theme for the dollar broadly, contributing to its bounce against the yen, along with Treasury-JGB yield spreads, which were widening on the U.S. fiscal stimulus outlook based on preliminary vote results from Georgia.
ADP data showing an unexpected decline in U.S. private sector jobs for the first time in eight months nN9N2H700E enhanced the view that lawmakers would act to provide the economy with more fiscal support if the Georgia voters delivered the Senate to the Democrats, contributing to the dollar boost.
USD/JPY briefly burst above the tenkan at 103.25 then retreated back below it after failing to mount a serious challenge to the kijun at 103.67 nL1N2JH1XZ.
GBP/USD's rally faltered before it could reach 1.37, spending the U.S. morning in retreat before trimming its losses, with the specter of possible BoE rate cut hanging over sterling after the UK went into its third COVID lockdown nL1N2JH1V2.
GBP/USD briefly fell below 10-day moving average support at 1.3565.
Bears would gain control below 1.3419, the 50% Fibo of the rise from 1.3135 to 1.3703.
AUD/USD hit a 33-month high 0.7820 on the view that a stimulus-inclined Democratic Senate would help global growth.
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