The unexpectedly record low increase in Q2 US employment Cost Index unwound the some of the dollar's weekly gains and neutralized the near-term technical outlook.  Next week's nonfarm payrolls are still critical, and the weakness may put even greater burden on the jobs data to demonstrate that slack is indeed being absorbed.  

The Dollar Index was poised to challenge the three-month high set on July 21 near 98.15, but the sell-off following the ECI report reversed the gains scored on the back of the FOMC statement and Q2 GDP (and upward revision in Q1).   The five-day moving average barely crossed below the 20-day average for the first time since late-June.  It did not close below 96.40 (a retreacement objective and 100-day moving average), but instead finished the week and month near the middle of the 96.00-98.00 trading range.  

The euro's five-day moving crossed above the 20-day average a day before the FOMC statement.  After the Q2 GDP data and a threat that the Greek government would collapse saw the euro briefly trade below $1.09.  It rebounded with the help of month-end demand and signs that the Greek government will survive until at least September.  Before the weekend, nearly covered the entire week's range.   Both the RSI and MACDs are consistent with a further push higher in the euro, but how fast it reversed the pre-weekend gains, and the relatively soft close suggests the bears are still in control.  Initial support is seen near $1.0950.  It may require greater confidence of a September rate hike before the $1.08 level can be breached.     

The dollar was pushing above JPY124.50, the upper end of its range since mid-June and was stopped cold by the disappointing ECI.  The fact that Japan's CPI excluding food and energy rose to 0.6% also discourage ideas that the BOJ the needs to provide additional stimulus. Support for the dollar is seen in the JPY123.00-JPY123.30 area.   A break that could signal a move into the JPY122.00-JPY122.50  band.