The dollar weakened in European trading hours Monday, but the moves were small and trading ranges tight as participants held off from putting on any big bets ahead of several risk events later on in the week, most notably Wednesday's Federal Open Market Committee meeting and Friday's nonfarm payrolls report.
After starting off the European session positively, the dollar quickly lost ground against the yen, euro and pound, as the focus turned to Wednesday's FOMC.
"The markets expectations are very much skewed towards the FOMC being more on the dovish side given recent comments from (Federal Reserve Chairman Ben) Bernanke and the media articles at the end of last week," said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London.
The Wall Street Journal Fed watcher Jon Hilsenrath wrote on Thursday that the central bank is set to keep its bond-buying program in place at its policy meeting this week, but that officials are likely to debate whether to refine or revise their forward-looking guidance.
Coming on the heels of dovish-leaning comments from Fed Chairman Ben Bernanke earlier this month, the dollar has come under pressure, hitting a one-month low against the yen in Asia hours of Y97.64.
"The market is fairly well prepared for weak data and a dovish Fed this week," said Mr. Stannard.
Aside from the FOMC, there's also key U.S. data to be released this week, including U.S. gross domestic product figures for the second quarter due Wednesday, July's ISM manufacturing reading on Thursday, and the nonfarm payrolls report on Friday.
Away from the U.S., the European Central Bank and the Bank of England are both meeting Thursday.
Monday's agenda is fairly quiet, with U.S. June pending home sales data due for release at 1400 GMT.
In other news, the Swedish krona firmed against the euro after data showed retail sales were stronger than expected in June, rising 0.6% on the month, compared with expectations for a 0.3% rise.
In emerging markets, the Israeli shekel was steady against the dollar ahead of the Bank of Israel's interest rate decision at 1430 GMT.
"The Bank of Israel's monetary policy committee meets today amid widespread expectations that it will keep the policy rate unchanged at 1.25%," emerging market strategists at Societe Generale SA said in a note to clients.
At 1037 GMT, the euro was trading at $1.3294 against the dollar, compared with $1.3279, late Friday in New York, according to trading system EBS. The dollar was at Y97.7 against the yen, compared with Y98.20, while the euro was at Y129.88, compared with Y130.42. The pound was trading at $1.5387 against the dollar, compared with $1.5382 late Friday in New York.
The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of major currencies, was at from 73.71.
A summary of key levels for chart-watching technical strategists is below:
Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF
Spot 1028 GMT 1.3294 97.79 1.5391 0.9273
3 Day Trend Bullish Bearish Bullish Bearish
Weekly Trend Bullish Range Bullish Bearish
200 day ma 1.3060 93.65 1.5478 0.9396
3rd Resistance 1.3376 99.40 1.5475 0.9395
2nd Resistance 1.3312 98.93 1.5438 0.9340
1st Resistance 1.3297 98.34 1.5413 0.9307
Pivot* 1.3277 98.52 1.5384 0.9286
1st Support 1.3253 97.63 1.5357 0.9263
2nd Support 1.3228 97.36 1.5314 0.9239
3rd Support 1.3195 96.95 1.5264 0.9176
Forex spot: EUR/JPY
Spot 1028 GMT 129.97
3 Day Trend Bearish
Weekly Trend Bullish
200 day ma 122.34
3rd Resistance 131.44
2nd Resistance 131.00
1st Resistance 130.52
Pivot* 130.81
1st Support 129.77
2nd Support 129.41
3rd Support 128.75
