Underlying doubts over the US economy will limit the scope for dollar buying with key event risk over the next 36 hours.
The dollar pushed to high of 1.5720 against the Euro on Tuesday, but was unable to sustain the gains and weakened to re-test support levels weaker than 1.58 before consolidating around 1.5785.
The US ISM index for the manufacturing index edged stronger to 50.2 in June from 49.6 the previous month, in contrast to expectations for a small decline. The headline figure will offer some reassurance, but the underlying components were less favourable. The employment index weakened to a five-year low while a rise in inventories will also cause concern as it will tend to curb future activity.
Exports continue to provide strong support while the prices index rose to the highest level for over 10 years which will maintain some pressure for higher interest rates to stem inflationary pressure.
Overall sentiment towards the US economy will remain fragile ahead of the key employment data over the next 35 hours with markets less confident that the Fed will be able to increase interest rates despite tough rhetoric from Fed Governor Lockhart.