Forex Today: Dollar rally takes a break ahead of key US data, FOMC Minutes

Here is what you need to know on Wednesday, July 6:

The US Dollar Index surged to its strongest level in nearly two decades on Tuesday and ended up gaining more than 1% on a daily basis boosted by safe-haven flows. The 2-10 year US Treasury bond yield curve inverted, suggesting markets are positioning themselves for recession. The dollar stays in a consolidation phase early Wednesday as investors await the ISM Services PMI data from the US. Later in the day, the Federal Reserve will release the minutes of the June policy meeting as well. During the European session, the European Commission will release the Economic Growth Forecasts and Eurostat will report Retail Sales figures for May.

Following Tuesday's volatile action, markets remain risk-averse mid-week with US stock index futures losing between 0.3% and 0.4%. Reports of Chinese authorities launching another round of mass testing in Shanghai and the city of Xi entering a seven-day period of 'temporary control measures' seem to be weighing on sentiment as well.

Meanwhile, crude oil prices suffered heavy losses amid the worsening demand outlook. The barrel of West Texas Intermediate (WTI) lost nearly 10% on Tuesday and plunged below $100 for the first time since early May. Late Tuesday, the Secretary-General of the Organisation of Petroleum Exporting Countries, Muhammad Barkindo, has died at the age of 63.

EUR/USD lost nearly 150 pips on Tuesday and touched its lowest level since December 2002 at 1.0235. The pair seems to have gone into a consolidation phase above 1.0250 on Wednesday.

GBP/USD posts modest daily gains in the European morning but continues to trade below 1.2000. Bank of England (BOE) Deputy Governor Jon Cunliffe reassured that they will not let high inflation get embedded but added that they were seeing signs that the UK economy was already slowing down. Meanwhile, British Finance Minister Rishi Sunak and Health Secretary Sajid Javid both handed their resignations late Tuesday, arguing that Prime Minister Boris Johnson has lost his ability to run the government properly and competently.

Falling crude oil prices weighed heavily on the commodity-sensitive loonie on Tuesday and USD/CAD jumped above 1.3000. 

USD/JPY continues to trade in a relatively narrow range above 135.00 as the JPY manages to hold its ground as a safe haven.

Gold broke below $1,800 and extended its slide to a fresh 2022-low near $1,763. XAU/USD posts small recovery gains and trades near $1,770 on Wednesday.

Bitcoin is having a tough time finding direction and trading in a tight range slightly above $20,000. Ethereum holds above $1,100 after having closed flat on Tuesday.