The dollar pared recent losses against most major currencies on Friday, scoring a particularly big bounce versus the yen, but its steep slide in July still left it on track for its worst monthly percentage drop in a decade.
The heavy selloff in the overbought yen was by far the biggest mover among the majors but part of month-end book-squaring ahead of traditionally slow and more volatile August trade.
EUR/USD initially rose overnight to a 1.1908 EBS peak following Thursday’s breakout beyond key 1.1823 resistance, but then retreated in profit-taking after USD/JPY held key supports just above 104 nL2N2F20TF.
Japan's finance ministry provided assistance by warning about the yen's "rapid" rise.
USD/JPY’s rebound played a significant role in the dollar’s broader rebound after its major range breakdown last Friday below 106 helped fuel this week’s sell-off in the U.S. currency.
The EUR/USD pullback followed data showing a slightly worse-than-expected record slump in euro zone Q2 GDP nL5N2F234K, a European stocks slide and market concerns about the impact of the euro's rapid rise on European exporters.
June personal spending met expectations with a 5.6% month-on-month rise, but income disappointed at -1.1% nL2N2F20O1.
Government aid remained under threat from political gridlock nL2N2F20KE.
The only indication of progress was that lawmakers were willing to keep talking as their summer recess approached.
After USD/JPY's low averted 104.19 key supports, it rose back to the May-June low by 106 that it broke below a week ago.
A run of EUR/JPY buy stops above July and June pandemic peaks reinforced the yen slide.
USD/JPY was nearing the 50% Fibo of July’s slide and the daily kijun there at 106.18, followed by the 61.8% Fibo and mid-June range lows at 106.64.
Sterling nearly reached its March 9 pre-pandemic peak at 1.3200 before retreating from its 1.3170 high toward unchanged after the London close and well after British Prime Minister Boris Johnson postponed the next stage of reopening due to rising COVID-19 infections nS8N2E305J.
The risk-sensitive pound also faced a 1.5% FTSE 100 drop and falling U.S. equity indexes.
But the pound fared better than the euro, with EUR/GBP down more than 0.5% and below its 55-day moving average for the first time since May.
The dollar rose against high-beta currencies, which were ripe for profit-taking after big gains earlier this month.
Gold and silver's gains shrugged off the dollar rebound.
Next week brings ISMs on Monday and Thursday, weekly jobless claims and Friday's non-farm payrolls.
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