The dollar index rose on Wednesday, notching up its biggest gain in a week, helped by dovish ECB comments that encouraged profit-taking on the euro's 4.8% rise over the last two months.
Month-end flows and position squaring ahead of a long U.S. holiday weekend also added to the dollar-positive mix and contributing to the first lower daily high and low for EUR/USD since March 12.
Meanwhile the market's adjustment to Fed patience over inflation and disappointing payrolls and other data indicating a more uneven recovery than expected has already run its course, but less so the ECB's resistance to talk about tightening, evident in ECB board member Fabio Panetta's comments on Wednesday nF9N2KZ01O.
EUR/USD's well-defined up trendline across April and May lows at 1.2150 serves as support ahead of this Friday's U.S. PCE inflation data and next Friday's employment report.
USD/JPY's 0.34% gain benefited nL2N2ND17X from month-end rebalancing flows and calls from a senior Japanese ruling party lawmaker for a $239bln extra budget and more BOJ asset buying to weaken the yen nL3N2ND124.
Recent USD/JPY range trading could prove a prelude to a breakout nL2N2ND1OD.
Dwindling vols suggest some complacency ahead of U.S. jobs data event risk.
Sterling's 0.21% pullback was less emphatic than EUR/USD's since it has failed to hit a new trend high since Friday.
Unflattering testimony about the UK government's COVID response nL2N2ND1AM produced few problems for sterling, with the focus more likely on last week's failed breakout above February's pandemic peak and sideway-to-lower 10-year Gilt-Treasury yields since May 5.
BOE tightening pricing has also tumbled back toward naught since mid-May.
USD/CNH bucked the strong dollar trend, falling 0.5% following the convincing break below previous support at 6.4000, a potential positive for high-beta and emerging markets currencies, though it failed to help the Australian dollar on the day.
AUD/USD fell 0.09%, trounced by NZD/USD's 0.83% gain after the RBNZ meeting pointed to sooner rate hikes.
The Aussie's losses against the dollar appeared more in line with other majors.
The nearly 24% plunge in iron ore prices from May's extremes, and China's stated quest to find new suppliers of the crucial ore, Australia's main export, is keeping AUD/USD on hold for now.
The event risk focus shifts to U.S. jobless claims Thursday and Friday's April personal income and consumption report, particularly core PCE seen up 0.6% m/m and 2.9% y/y.
The May Chicago PMI and final May Michigan sentiment reports are also out Friday, as preludes to May's employment report on June 4.
For more click on FXBUZ