Oct 19 (Reuters) - The dollar index fell on Tuesday but recovered well off its lows after holding secondary chart supports and the ECB's chief economist, Philip Lane, warned markets against pricing in ECB rate hikes the bank itself is not contemplating .
The dollar's early weakness was led by a breakdown in USD/CNH below key 6.4 support to 4-month lows amid a rebound in risk-taking, which also benefited the Australian dollar and other higher-beta currencies.
Dollar selling subsided versus the euro, pound and yen after longer-term Treasury yields resumed their rally and the corrective dip in short-term yields steadied.
Markets shrugged off below-forecast U.S. housing starts and permits as yet another example of strong demand running into pandemic-driven supply problems .
The dollar index found support by its 30-day moving average and 38.2% Fibo of the September-October advance , just as EUR/USD ran into resistance from its 30-DMA and 38.2% Fibo, both correcting the dollar's overbought condition.
EUR/USD was up 0.25% after clearing its 21-DMA hurdles and then being pushed back from by 30-DMA at the 1.1670 EBS high Tuesday. A close above the 30-DMA could see more of the drop from September's high retraced and some recent spec shorts squeezed , while waiting to see how much supply problems are slowing the U.S. and euro zone economies.
Federal Reserve Governor Michelle Bowman noted the U.S. labor market could struggle to return to pre-pandemic levels .
Richmond Fed President Thomas Barkin suggested labor supply tightness and upward wage pressures will persist longer as part of the higher inflation landscape the Fed is expected to address by ending emergency easing measures.
Risk-sensitive GBP/USD gained 0.5% after its early spike up above cloud and 100-DMA hurdles amid soaring 2-year Gilt-Treasury yield spreads and the S&P 500 rallying almost to September's record high.
The pound's rapid rise comes as the market prices in 37bp of BOE rate hikes before year-end and nearly 118bp by the end-2022. The market has priced in the first full 25bp Fed rate hike by next September and not quite a second one by end-2022 .
USD/JPY was flat, bumping up against offers just below major resistance at 114.50-55 for a third session.
A modest pullback in short-term Treasury yields helped to keep USD/JPY below large 114.50 barrier options, as well as the 76.4% Fibo of the 2016-2020 slide and 2018 high at 114.54-55.
Though USD/JPY is still working off overbought readings, the mismatch between the Fed and BOJ should underpin prices and eventually produce a breakout . Surging energy prices also favor a higher USD/JPY.
Bitcoin and ether were up about 2.3% and 1.7%, the former nearly back up to April's 64,895 record high as the Proshares bitcoin futures ETF debuted, with others set to follow .
UK, euro zone and Canada inflation reports are out Wednesday, but no top-tier U.S. releases. U.S. claims, Philly Fed and existing home sales are out Thursday. Friday brings global PMIs for October.
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(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)
Source : https://www.nasdaq.com/articles/buzz-comment-us-recap:-eur-usds-rebound-trimmed-by-resistance-easy-ecb-reminder-2021-10-19554