The dollar surged to two-month highs on Thursday as below-forecast U.S. jobless claims nAPN045RMN helped kick the euro below key Fibonacci support and propelled USD/JPY closer to a test of resistance around 106, while the BoE boosted sterling by pushing negative-rates worries out to 2022.
In late U.S. trade, EUR/USD remained mired below the 50% Fibo of its November-January advance nL1N2KA1RL at 1.1975 and probed below the 100-day moving average at 1.1962 for the first time since Nov.
After that, the daily cloud base at 1.1956 is the last notable support until the 61.8% Fibo at 1.1887.
A squeeze of spec dollar shorts fueled the move and the euro derived little benefit from 10-year BTP-Bund yield spreads tumbling to their tightest since early 2016 after former ECB President Mario Draghi on Wednesday accepted the task of forming a new Italian government.
Markets remained focused on U.S. economic and COVID-19 vaccine outperformance, with Congress readying more fiscal support nL1N2KA1PF.
Meanwhile, disparity between EUR and USD 5-year/5-year inflation linked swap spreads suggests the Fed will lead any eventual policy rate hiking, also favoring the dollar.
Sterling rebounded rapidly after the BOE held rates steady and reduced worries about of moving to negative rates policy anytime soon nL1N2KA1OJ.
Sterling recovered from its lowest since Jan.
18 and a break below 30-day moving average support.
Though it was up only marginally up on the day, cable rose nearly 1% from its pre-BoE lows to its post-meeting highs.
EUR/GBP slid roughly 0.75% to its lowest since May.
Rallying USD/JPY rode roughshod over spec shorts, powering toward important resistance by 106 nL1N2KA1V3.
With Japan yet to begin vaccinations, the economy in recession and the BOJ basically out of bullets, improving U.S. data and expanding inoculations provide a stark contrast.
AUD/USD slid near pivotal 55-DMA support at 0.7581, just above a rising daily cloud, while USD/CNH consolidated before a pandemic-limited Lunar New Year next week.
The broader dollar index was well above the 38.2% Fibo of its September-January slide that capped the preceding two sessions, heading toward the 50% at 91.97 that overlaps December's high nL1N2KA1ME.
Emerging market currencies, except the high-yielding TRY, sank against the dollar amid falling metals prices, even as oil got a boost from falling U.S. inventories and OPEC+ affirming production cap plans.
Ethereum held up better than Bitcoin, while silver succumbed to the real-world weight of a stronger dollar.
The U.S. employment report tops Friday's agenda, with expectations skewed higher after ADP and jobless claims surprises.
Next week, attention might shift to the impeachment trial in the Senate, which could delay work on the fiscal stimulus bill.
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