B.In late New York trading, EUR / USD had pulled back from its rebound high of 1.1915 on the EBS below the 200-DMA at 1.1886.
Although the dollar strengthened, the Fed protocol changed little in the view that monetary policy will remain extremely loose until overwhelming economic evidence convinces policymakers that they will meet their aggressive employment and inflation targets.
While the protocol acknowledged that the balance of economic risk had become more neutral, it raised concerns that a sustained rise in yields could jeopardize progress towards the targets. The meeting took place before the standout March ISM and job dates.
Hawks may have more to say if the pace of recovery continues this year by surprise. However, the possible lifting of suspended loan and rental payments and other pandemic backstops in the course of this year must also be taken into account.
The dollar strengthened after the minutes when the feared drop in US Treasury bond yields did not materialize after the release.
Another bullish Eurozone PMI update and hopes that the EU’s huge gap with the US and UK on vaccinations will narrow in the second half of the year helped the euro trade earlier.
Much of the dollar gains this year were due to longer-term government bond yields returning to pre-pandemic levels, displacing lost speculative short positions in the dollar.
But with government bond yields now closer to pre-pandemic levels and most of the speculative dollar shorts now covered, much of the upward pressure on the dollar is over.
The pound sterling remained heavily oversold and oversubscribed after the EUR / GBP reversal on Monday due to the downtrend in specs. This reversal near key support reinforced the view that the UK’s vaccination advantage over the EU may have peaked.
Cable’s two-day dive was inspired in part by this week’s highs rejected by the bottom of November’s broken trendline. So far, the daily cloud base remains intact at 1.3715, making this the eleventh session in a row within the now narrowing and acute cloud range.
USD / JPY consolidated this month’s pullback from 110.97, holding above the often-decisive 21-day moving average, last week’s low and 61.8% Fibo of the 108.34-110.97 rise at 109 , 40/38/35. Prices firmed in late New York trade but the technical bias remains bearish as prices stay below 111.
The main events on Thursday are the weekly jobless claims and the appearance of Fed chief Jerome Powell.
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(Edited by Burton Frierson Randolph Donney is a Reuters market analyst. Views expressed are his own.)
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.