* U.S. nonfarm payrolls data key to the week
* U.S. dollar seen continuing weak trend, for now
* Markets look to ECB clues on unconventional easing
By Gertrude Chavez-Dreyfuss
NEW YORK, June 26 (Reuters) - The U.S. dollar is likely to weaken in the coming week, especially against commodity currencies, with investors expected to continue their foray into riskier assets amid signs a global recession is easing.
Thursday's U.S. nonfarm payrolls report for June will be the highlight of a data-packed but holiday-shortened week. Market participants have priced in generally moderate job losses of 355,000, according to a Reuters poll, after months of posting declines of more than half a million each time.
Labor market indicators have pointed to another positive surprise in the June U.S. employment report, analysts said.
The jobs data should undermine demand for the dollar as a safe haven, although dollar losses could be limited depending on the level of unemployment. Analysts were expecting a 9.6 percent unemployment rate this month after 9.4 percent in May.
"A better-than expected jobs report would be a positive for risk-taking, which should add pressure to the dollar because this means higher risk appetite for investors who are keen to put their money outside the U.S.," said Sebastien Galy, currency strategist at BNP Paribas in New York.
The ICE Futures' dollar index <.DXY>, a gauge of the greenback's value versus a basket of six other major currencies, was down 0.6 percent on the week, its weakest showing in about a month.
The Australian dollar
The euro
BNP's Galy thinks investors will be looking more at the relative performance between the United States and Europe. "Right now, Europe is weaker than the U.S. and I'm not sure whether the euro will outperform the dollar if the jobs report comes out stronger than forecast."
ECB WATCHED FOR LIQUIDITY CLUES
Other U.S. economic data on tap next week are the key manufacturing surveys in New York and Chicago including the closely-watched Institute for Supply Management index.
Analysts are looking at another increase in the ISM manufacturing index to 44.5 in June with the continued decrease in credit spreads and huge gap between demand and production.
Aside from U.S. data, investors will also monitor Thursday's European Central Bank briefing after its rate announcement. Analysts expect the ECB to keep interest rates at 1.0 percent, which should hold for a prolonged period.
"The ECB has finished lowering its policy rate, and we do not expect any major changes in tone at the press conference," said Danske Bank in a research note. "The ECB will probably be relatively soft in its rhetoric and stress that rate increases are still a long way off."
Investors, however, would look for clues as to whether the ECB is increasing its "unconventional" easing measures.
A record amount of liquidity was injected into the money markets through the first-ever one-year refinancing operation last Wednesday. That offered banks the opportunity to tap unlimited funding for 12 months at 1 percent.
Price action in euro/dollar, however, is expected to remain subdued in the run-up to the ECB policy meeting. The currency pair remains hemmed in a tight $1.37 to $1.42 range, with the euro unable to ratchet higher.
Confidence indicators have generally improved, particularly Germany's ZEW investor sentiment index, which is now at its highest in three years. But most confidence indicators remain weak by comparison with historical measures.
Analysts believe investors will recognize Europe's problems over time, and they will eventually sell the euro as a result and buy the dollar.
"It's going to be more and more apparent that the U.S. is improving much quicker relative to its counterparts, such as the euro zone," said Meg Browne, currency strategist at Brown Brothers Harriman in New York.
"People will start looking at growth differentials and any positive U.S. data should be dollar-supportive going forward, and any bad euro zone data will weigh on the euro." (Editing by James Dalgleish)