USD Weakens as EUR/USD Stabilizes, USDJPY Drops on Japan Intervention

The dollar index retreated 0.6% to 106.20 as major pairs staged recoveries against the greenback. EUR/USD found support at 1.0500 and climbed to 1.0545, helped by short covering ahead of month-end flows. The biggest move came in USDJPY, which plunged 1.2% to 155.30 after suspected Bank of Japan intervention. Japanese officials reportedly conducted operations totaling $5-7 billion to defend the yen following its breach of 157.00. Gold benefited from dollar weakness, rising 0.8% to $2,352. Market positioning data shows speculators remain heavily long dollars, suggesting potential for further unwinding if US data disappoints. Technical indicators point to dollar exhaustion after its recent rally, with RSI readings in overbought territory across multiple timeframes. Traders await Friday's US PCE inflation data, which could determine whether the dollar correction extends or reverses.