The dollar was flat versus the euro and sterling and down versus the haven yen after early U.S. stock market gains eroded in response to Chinese nZUN003013 and U.S. manufacturing data that fed concerns the best of the economic recovery from the pandemic may be past.
Additionally, Fed's call that inflationary pressures will prove transitory, with less need to rush tapering and tightening, could be correct.
Those were pretty big extrapolations, particularly from the ISM report, where most indexes remain at very elevated levels nL1N2P914T, even if showing some signs of coming off the boil.
But Delta variant risks heading into the new school year and worries about a possible U.S. debt ceiling showdown added to the angst.
The upshot was risk-off flows that sent USD/JPY sharply lower on haven yen buying as Treasury yields tumbled toward July's key lows.
USD/JPY fell 0.4%, with July's technically important 109.07 lows nearby nL1N2P91AT.
EUR/JPY, GBP/JPY and other yen crosses were also down due to risk aversion.
If USD/JPY breaks July's lows it would lend credence to top-heavy weekly charts that show scope for a drop to 108.
EUR/USD slipped 0.04%, giving up early gains to 1.1897 that were aided by Euro Zone PMIs that softened slightly, but beat forecast nZRN002HKS.
Last week's rebound into month-end helped reset recently oversold daily studies, leaving prices in a more neutral position, with shorter-term moving averages on the cusp of bullish cross-overs nL1N2P90ZP.
Even with stellar U.S. economic data, such as the June non-farm payrolls rising 850k, the dollar has struggled to maintain gains due to relentless downward pressure on nominal and particularly real Treasury yields.
So it's not entirely clear that a decent jobs report Friday would send the dollar sustainably higher nL1N2P9105.
Sterling fell 0.1%, after the late July rapid rebound in prices faltered Thursday and Friday by the 61.8% Fibo of the June-July slide, as well as by the thin daily cloud and 55-day moving average, putting that recovery on pause for now.
The dollar was mixed versus high beta and emerging market currencies, the latter finding some solace in falling Treasury yields, though not in crumbling crude oil prices.
Aussie added 0.26%, as local data has held up better than thought amid lockdowns.
Ether is up more than 3% versus small bitcoin losses ahead of the ethereum upgrade on Aug.
4 nL1N2P52T4 and ongoing angst regarding crypto regulation and the BIS's warning about "Big Tech" potentially destabilizing the banking system nL1N2P90IY.
The next economic event risks are Wednesday's ADP and ISM services reports, followed by Friday's employment report.
Markets will also be keeping tabs on U.S. spending bills and pandemic updates amid the dominant Delta variant.
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