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BUZZ-COMMENT-US recap: EUR/USD loses most gains as Brexit adds to puzzling picture

Credit: REUTERS/Dado Ruvic

The dollar and other major currencies retreated into narrow ranges as investors puzzled over a confusing picture of failing Brexit talks [nL8N2H710T][nL9N2G501C], U.S. consumer resilience [nL1N2H61J3] and vaccine optimism [nL4N2H72L3].

Oct 16 (Reuters) - The dollar and other major currencies retreated into narrow ranges as investors puzzled over a confusing picture of failing Brexit talks , U.S. consumer resilience and vaccine optimism .

Sterling overcame an early slump as traders tried to discern whether the UK called off Brexit talks as an act of brinkmanship or actually intended to pursue a hard break at year-end .

GBP/USD slumped to 1.2860, nearing October's 1.2819 low, during the gyrations. The 1.2962 high came by the cloud base and tenkan at 1.2961/64.

Cable's kijun at the 50% Fibo of the September-October recovery at 1.2880 is now a closing pivot point. Even more pivotal are the 100-day moving average and 61.8% Fibo at 1.2836/31 by October's low.

EUR/USD was boosted by a EUR/GBP surge during the initial response to no-deal Brexit warnings. It held above Thursday's 1.16885 intraweek low on EBS by the lower 10-day Bolli and 23.6% Fibo of the whole March-September pandemic recovery at 1.1689.

A break below there would reinforce the bearish bias that indicates a potential test of September's lows .

The risk-positive stronger-than-expected U.S. retail sales spared EUR/USD -- and the massively long speculative community -- a deeper retreat since it is positively correlated to the S&P 500.

Posing a test for dollar and risk currencies, the retail sales report could diminish political motivation to enact new coronavirus relief, containing gains in Treasury yields and stocks.

Should EUR/USD resume its fall next week, chart focus will be on the cloud base and 100-DMA by 1.1600, just below September's 1.16125 low.

AUD/USD was on track to close below the 100-day moving average at 0.7097 for the first time since clearing it on May 19 , as the RBA edges toward easing and China ramps up trade restrictions on Australian commodities . Aussie is also close to September's 0.7006 low.

USD/JPY moved toward the top of its modest 105.04-625 four-day range on higher Treasury-JGB yield spreads.

USD/JPY was supported somewhat by BOJ Deputy Governor Wakatabe Masazumi's comments hinting at the bank's limited easing options and importance of FX amid deflation concerns .

A close above hurdles in the 105.50-63 range is needed to put a period on this week's retreat to the 50% Fibo of the September-October rebound at 105.05.

The dollar was mixed against emerging markets currencies after a 0.4% drop in USD/CNY that was trimmed in subsequent USD/CNH trading. China reports Q3 GDP on Sunday, seen up 5.2% year-over-year.

Housing data and the Fed's Beige Book highlight U.S. releases next week, while global October PMI releases begin on Friday.

For more click on FXBUZ

(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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