The dollar gained against the euro and sterling on Tuesday but had to navigate through choppy trade after markets initially reacted dovishly to a highly anticipated live interview of Fed Chair Jerome Powell.
Investors applied heavy scrutiny to Powell's comments since they followed last Friday's frothy jobs data nL1N2UT1TV.
The market initially focused on Powell's prediction of significant declines in inflation this year, disregarding his other remarks and those of hawkish Fed speakers nL1N34N1G4that highlighted how tight U.S. labor market conditions are and the lengthy process of taming inflation that still lies ahead.
Powell also noted that he had yet to see much disinflation in the service sector, which is where most are employed and the bulk of GDP is derived.
It's likely that part of the initial dovish reaction to the Fed Chair's comments was due to post-payrolls rises in Treasury yields and the dollar running into technical resistance this week, leaving markets on edge.
EUR/USD fell 0.2% after reversing initial gains on Powell's remarks, and slipping well away from its 1.0767 high on EBS after Treasury yields came sharply off their lows.
Traders will be watching the pivotal 55-day moving average support at 1.0665 by Tuesday's 1.06695 low.
USD/JPY fell 0.95% after earlier extending its fall from Monday's rebound high by the descending 55-DMA and Fibo resistance by 133.
The sell-off was driven largely by yen demand from risk-off repatriation flows, Japanese exporters, renewed speculation about BoJ policy normalization and wariness regarding how far the yen could slip without prompting FX warnings from the MoF.
The 130.47 EBS low is by the tenkan at 130.49 and well above the pivotal 21-DMA at 129.95 last.
Sterling's post-Powell rebound from a 1-month low was fleeting and fended off below 1.2300, leaving marginally lower Tuesday amid UK recession risk and the BoE's inflation fighting dilemma.
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