The dollar gave up earlier gains on Wednesday, trading near flat as markets settled in to await the ECB's meeting, with EUR/USD erasing most of its earlier probe of the 1.2000 level after it failed to produce a bigger correction of this month's 3% rally.
With no policy changes expected, markets will scrutinize any references to unexpectedly paltry buying under the ECB's Pandemic Emergency Purchase Programme or signs of growing division between governing council members over when to taper ultra-accommodative measures.
EUR/USD's April rally has been fueled by rising 10-year Bund-Treasury yield spreads, as aggressive Treasury shorts were pruned and bets against Bunds increased partly on the PEPP slowdown and hopes faster EU vaccinations will hasten the economic recovery.
But EUR/USD's rally may need an unexpectedly hawkish ECB to get further support from Bund-Treasury yields spreads.
Greater reluctance from the Fed at next week's meeting to taper eventually would also help the euro bulls' cause.
The market may consolidate until after Thursday's ECB and April flash PMI readings on Friday, and it might possibly await next Wednesday's Fed meeting.
A bounce in Treasury yields before Wednesday's London close came amid rebounding equities that dimmed demand for the haven dollar and yen.
But the re-opened 20-year Treasury auction went quite well, trimming early yield gains.
Sterling followed EUR/USD's pullback and recovery lead to end roughly unchanged.
As with most dollar pairings, a bounce in stocks reduced demand for the haven dollar after Tuesday's risk-off jag.
Tuesday's 1.4009 peak in the pound ran into prior highs, the 61.8% Fibo of the slide from February's high and the underside of a prior up trend-line, while Wednesday's 1.3886 low found support at the 38.2% Fibo of the February-April 1.4240-1.3670 fall that bottomed out with the help of the 100-day moving average nL1N2ME1DO.
USD/JPY's March slide found temporary technical respite near Wednesday's 107.88 lows on EBS, but options expiries, technical resistance near 109 and an overhang of spec long positions above current prices suggest consolidation of the downtrend before the key central bank meetings, rather than a meaningful rally nL1N2ME1LO.
A hawkish steer from the BOC nL1N2ME1G6 sent USD/CAD down about 1%, to its lowest since March 18th's 3-year low at 1.2361, but a greater than 2% drop in WTI likely staved off a test of that key support.
Other than the ECB meeting, Thursday features U.S. jobless claims ahead of global April PMIs on Friday.
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