The dollar surrendered more of its recent Fed-fueled gains on Monday as technically inspired profit taking marked the beginning of this week's four-day vigil ahead of a non-farm payrolls report that could decide whether the U.S. announces the start of stimulus reduction in November.
Markets were also struggling with a confusing mix of issues pertaining to the global recovery ranging from supply-chain problems to rising energy prices, Chinese regulatory disruptions and the unsettled U.S. fiscal situation, which could ultimately affect the Fed's drive to normalize policy.
EUR/USD's recovery stopped below August's 1.1664 prior 2021 low, which it broke beneath last Wednesday.
A spike up in oil prices after OPEC+ maintained its gradual pace of production increases nL8N2R01HS, despite Brent near its highest since 2018's peaks, WTI at 8-year highs and natural gas prices surging nL1N2QU2BS.
If prolonged, energy price rises could spur more inflation and force the Fed to tighten despite hopes the inflation will be transitory.
EUR/USD gained 0.25% and is likely to consolidate ahead of U.S. ISM services on Tuesday, ADP on Wednesday and Friday's employment report, forecast at 488,000 versus August's disappointing 235,000.
EUR/USD spec longs have whittled down their massive net long EUR/USD position over the last year to almost nothing, thus a bigger breakdown may need to enlist fresh outright sellers.
USD/JPY gave up early gains to fall 0.16% as stocks and long-term Treasury yields fell after St.
Louis Federal Reserve Bank President James Bullard again stoked fears about inflation remaining elevated as business are having no trouble raising prices nW1N2B802C.
The subsequent flattening of the yield curve signaled that expected Fed rate hikes in late 2022 and 2023 will be enough to keep inflation subdued longer-term.
USD/JPY's drop brushed support from August's high, the 38.2% Fibo of the August-September rally and the 10-day moving average by 110.80.
China and energy angst added to pre-payroll trepidation nL1N2R01IC.
Sterling was up 0.5%, managing to get back above the August and late September lows it broke below last week, but the bargain hunting and profit-taking rebound from last week's 2021 low at 1.3412 will need to close this week above the 55-week moving average and weekly tenkan at 1.3662 to persist.
And BOE early 2022 rate hike expectations will need to remain ahead of the Fed's first tightening priced for late 2022 nL1N2R015U.
AUD/USD gained 0.37%, but was outpaced by USD/CAD and USD/NOK drops of 0.55% and 0.66% with crude prices up roughly 3% after the OPEC+ production plan was unchanged.
USD/CNH was up 0.24% amid ongoing Chinese deleveraging, economically disruptive regulatory changes and rising geopolitical tensions.
Bitcoin and ethereum were well supported, with bitcoin trading its highest since the Sept.
7 plunge from 52,956 to 42,900.
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