Aug 26 (Reuters) - The dollar slid against major currencies as U.S.-China angst helped prevent 10-year Treasury yields from testing their August highs ahead of Thursday's speech by Fed Chair Jerome Powell, which is expected to signal a strategic dovish policy shift.
The Commerce Department's addition of 24 Chinese companies to the entity list helped quash the dollar's attempt to rally on solid durable goods orders .
Powell is expected to affirm the need for rates to remain low, possibly through average inflation targeting. Markets see that as crucial to reduce the real-interest-rate cost of coronavirus-related deficit spending -- and also a weight on the dollar and boost for financial and hard assets .
EUR/USD hit its 1.1773 low on EBS shortly after the durable goods release and the U.S.-China headlines but proceeded toward Tuesday’s 1.1843 high by late-U.S. trade, leaving a long tail and indecisive doji on the daily candlestick. It marked a third session inside Friday’s 1.1754/883 range in consolidative price action.
Weighing on the dollar, 10-year Treasury yields failed to reach August’s 72.7bp high by the 50% Fibo of the June-August decline at 73.1bp. A second stellar Treasury note auction in as many days sent yields lower in the afternoon, though a broader bottoming pattern from pandemic lows is evident.
Though EUR/USD remains encumbered by near-record net speculative IMM longs, a reversal of the uptrend will require the string of eight higher weekly lows, last week’s at 1.1754, to be broken.
The stocks-tracking pound rose back to the upper 21-day Bolli band by 1.3220, near August’s 1.3266 recovery peak, helped by EUR/GBP's drop below the daily cloud bottom for the first time since June 2. Sterling has been ignoring the looming October deadline to clinch a Brexit deal, with talks next week in question .
USD/JPY fell with the dollar, failing to reach key 55-day moving average resistance at 106.64 and subsequently probing 21-DMA support by 105.94. Japanese Prime Minister Shinzo Abe's press conference on Friday covering his health looms, but USD/JPY is being driven by Treasury yields and Powell anticipation .
Reaction to Powell will be closely watched in FX risk gauge AUD/JPY, which remained at the top of its rising range and seeking a breakout catalyst.
Dollar weakness and Hurricane Laura in the Gulf of Mexico -- headed for Texas and Louisiana -- underpinned energy prices .
Silver and gold rebounded as potential pre-Powell risk hedges.
Thursday's weekly jobless claims take the spotlight after wildly divergent August Markit PMIs and consumer confidence.
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))
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