The dollar index tumbled on Thursday, falling below October's pullback lows to the uptrend line from Q2 after U.S. Q3 GDP growth slowed more than expected nL1N2RN30R and the ECB displayed less confidence that inflation would recede quickly.
Investors trimmed aggressive bets on Fed hikes nL1N2RO1UN, while ECB concerns that inflation would remain above 2% in 2022 encouraged EUR/USD's rally past recent recovery highs and key resistance nL1N2RO1SZ.
ECB President Christine Lagarde attempted to dissuade market pricing of an ECB rate hike by end-2022, but the inflation focus captured traders' attention nF9N2PW021.
A bigger-than-forecast fall in jobless claims to pandemic lows, particularly continued claims from the non-farm payrolls survey week, suggesting a substantial drop in October's jobless rate, didn't help the dollar much.
Supply chain issues, particularly in the automotive sector, weakened GDP growth and could linger for several quarters, while fading fiscal and monetary stimuli will also weigh.
The lead-in to Thursday's European and Americas trading was a massive spike in Australian 3-year yields to 1.20% from 0.73% to start the week after the RBA seemingly abandoned its yield curve control target of 0.1% in the wake Australian core inflation making a six-year high last quarter nL1N2RO015 and the yield target looking increasingly out of step with reality and other central banks.
Similar to the ECB, the BOJ Thursday maintained its ultra-easy policies nL1N2RO039.
EUR/USD was up 0.7% to its highest since Sept.
28 and threatening to close above the 38.2% Fibo of its September-October slide and recent rebound highs nearby at 1.1670.
The 161.8% Fibo target off October's base perfectly matches the September and July highs at 1.1909, as well as the current 200-day moving average.
USD/JPY fell 0.3%, recovering a bit after making a 113.26 low on EBS, its lowest since the Oct.
14 swing low at 113.21 that is also the 38.2% Fibo of October's follow-on advance from the hawkish Sept.
Unless the 113.21 supports give way, the pullback from October's multi-year high of 114.695 on EBS will look like an needed correction, but a close below it would enter a space with little support until the 112.23-40 range nL1N2RO227.
GBP/USD was up 0.31% after failing to reach Wednesday's 1.3709 low that held the 55-week moving average.
A rebound in Gilt-Treasury yield spreads and strong stocks favored the risk and rates-sensitive sterling.
Cable remained below the 50% Fibo of the June-September slide at 1.3831 as the market awaits a potential BOE hike next week nL1N2RO1MP, with 122bp of rate hikes priced in by end-2022.
AUD/USD's 0.3% advance was limited by the 200-DMA and 50% Fibo of the fall from this year's highs to its lows, at 0.7557/59 nL1N2RO2I4.
Bitcoin and ether gained 3% and 6.63%, respectively.
Friday features euro zone GDP and inflation updates, followed by U.S. personal income, spending and core PCE, then Chicago PMI and Michigan sentiment.
For more click on FXBUZ