Tuesday, November 15, 2011

FOREX : Euro steady, stuck near bottom of recent range

1 Italian debt yields resume rise after auction

3 Euro support near $1.3569, Ichimoku cloud bottom

SINGAPORE, Nov 15 (Reuters) :
                                The euro held steady against the dollar on Tuesday, but was stuck near the bottom of its range so far this month as new governments in Italy and Greece failed to ease fears about the euro-zone sovereign debt crisis.

The euro had gained some reprieve in recent sessions as a change in leadership in Italy and Greece eased worries of political uncertainty and stirred hopes for progress in tackling Europe's debt problems.

But such optimism was tempered when Italian and Spanish government bonds came under renewed selling pressure on Monday. A drop in European equities, including banking shares, also did the euro no favours.

While day-to-day fluctuations in the euro and investor risk appetite are hard to predict, the single currency is likely to remain under pressure versus the dollar and the yen in coming weeks, said Junya Tanase, chief FX strategist for J.P.Morgan in Tokyo.

"There is no doubt that Europe is nowhere near a situation that can be viewed with optimism," Tanase said.

"The bias is toward risk-off with both the dollar and the yen rising, while cross/yen pairs including euro/yen are likely to come under downward pressure," he added.

The euro held steady at $1.3628, struggling to regain ground after dipping 0.8 percent the previous day. The euro is now at the lower end of its trading band since late October of $1.3484 to $1.4248.

Possible support for the euro lies near $1.3569, the bottom of the cloud on the daily Ichimoku chart, a popular form of technical analysis.

The single currency held steady versus the yen at 105.07 yen , stuck near a one-month low around 104.74 yen hit last week.

Italy paid a euro-era high price to sell five-year bonds on Monday, just a day after former European Commissioner Mario Monti was named to lead the country -- a move that had been hoped would help restore investor confidence.

The dollar held steady against the yen at 77.11 yen, hovering near Monday's two-week low around 76.81 yen, which was the lowest since Japan's massive yen-selling intervention on Oct. 31.

FOREX - Euro slips versus dlr before Italian bond auction

1 Euro slips as markets cautious ahead of Italy auction

2 Rebound possible on optimism over new Italy, Greece govts

3 Dlr/yen edges to lowest since Oct. 31 intervention


LONDON, Nov 14 (Reuters) -
                          The euro slipped against the dollar on Monday with nerves ahead of an Italian bond auction undermining initial optimisim about the prospect of crisis-fighting reforms under new governments in Italy and Greece.

On Sunday, Italy's president appointed former European Commissioner Mario Monti to head a new government charged with implementing urgent reforms to end a crisis that has endangered the whole euro zone.

Italy's 3 billion euro auction of five-year bonds was expected to find buyers, but at a record high yield which underscores the challenges the country's new technocratic government faces to restore market confidence.

The common currency slipped 0.3 percent to $1.3710 early in the London session as caution weighed ahead of the bond sale. Traders cited sizeable options expiries at $1.3750. Earlier the currency had risen as high as $1.3811 with near term resistance near its two-week high of around $1.3870 and offers from Asian sovereign investors cited above that.

"We stepped back from the brink on Thursday and Friday and the news from Italy just adds to that. The fact that we have these technocratic governments in place is a positive, in that they'll press toward the sort of austerity measures required," said Simon Derrick, head of currency research at Bank of New York Mellon.

In Greece, new prime minister Lucas Papademos begins the tough task of rebuilding Greece's credibility with financial markets by pushing through tough austerity measures needed to stave off bankruptcy.

"After a bit of consolidation we'll have the euro testing back up, and we'll be having a look at $1.3850 again in the not- too-distant-future," Derrick said.

Nevertheless after Italy's 10-year bond yield soared above 7 percent last week, to levels seen as unsustainable, markets remain nervous over the consequences of more pressure on the euro zone's largest government bond market.

Some traders said that for the euro to post more gains, it would have to break past decent resistance at around $1.3870.

YEN STRENGTH GROWING

The euro was also lower against the yen, trading at 105.62 yen. The U.S. dollar eased against the yen to 76.99 yen, its lowest since Japan's Oct. 31 intervention.

Appearing to support Japan's recent currency intervention aimed at curbing excess volatility, the head of the International Monetary Fund said on Saturday the move was in line with the spirit of the G7 and G20.

But traders said interventions, particularly unilateral actions such as Japan's latest moves, are unlikely to have a long-term impact and the dollar is likely to slip on any signs of problems in the U.S. economy.

"The dollar could fall to around 76 yen this week and to 72 yen by the end of year, said Hideki Amikura, forex chief at Nominal Trust Banking, noting that the U.S. yield curve is likely to flatten further given that the Federal Reserve has committed itself to keeping rates low until 2013.

"If the U.S. PPI (producer price index) is weak, that suggests recent strength in U.S. retail sales is due largely to price cuts, not strong demand," he said.

The dollar index stood at 77.116, well off last week's high of 78.165. The Australian dollar fell to $1.0265, well of the session high of $1.0351.

FOREX-Euro dips; dollar/yen spikes briefly on stops

1 Middle East bids, fund repatriation support euro

2 Euro support near $1.3569, Ichimoku cloud bottom

3 Euro/yen hovers near critical support area

4 Dollar/yen spikes briefly on stops, large-lot flow

SINGAPORE, Nov 15 (Reuters) -
                              The euro dipped on Tuesday, stuck near the bottom of a recent trading range after a rise in Italian and Spanish bond yields underscored the challenges facing Europe as it tries to contain the region's debt crisis.

The dollar briefly spiked higher against the yen but later gave back most of its gains, and traders said the move was likely caused by a large-lot flow and stop-loss buying, and was probably not intervention.

The euro had gained some reprieve in recent sessions as a change in leadership in Italy and Greece eased worries of political uncertainty and stirred hopes for progress in tackling Europe's debt problems.

But such optimism was tempered when Italian and Spanish government bonds came under renewed selling pressure on Monday. A drop in European equities, including banking shares, also did the euro no favorite.

While day-to-day fluctuations in the euro and investor risk appetite are hard to predict, the single currency is likely to remain under pressure versus the dollar and the yen in coming weeks, said Junya Tanase, chief FX strategist for J.P. Morgan in Tokyo.

"There is no doubt that Europe is nowhere near a situation that can be viewed with optimism," Tanase said.

"The bias is toward risk-off with both the dollar and the yen rising, while cross/yen pairs including euro/yen are likely to come under downward pressure," he added.

The euro fell 0.1 percent to $1.3618, staying on the defensive after slipping 0.8 percent the previous day. The euro is now near the lower end of its trading band since late October of $1.3484 to $1.4248.

Possible support for the euro lies near $1.3569, the bottom of the cloud on the daily Ichimoku chart, a popular form of technical analysis.

While persistent worries over the euro zone's debt problems were likely to leave the euro vulnerable, one trader said the single currency was likely to be supported below $1.36 due to bids from Middle Eastern sovereign players and European players' fund repatriation ahead of their year-end book closings.

The single currency dipped 0.1 percent versus the yen to 104.97 yen, stuck near a one-month low around 104.74 yen hit last week.

Euro/yen is hovering near a critical support area of 104.70 yen to 104.90 yen, where a number of support levels are clustered. A 61.8 percent retracement of the euro's rally versus the yen in October stands near 104.90 yen, while its lows in the past few weeks converge around 104.70 to 104.80 yen.

A break below that support area could open way for a test of Ichimoku cloud bottom, which now comes in near 104.12 yen, said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo.

EUROPEAN BOND YIELDS

Yields at a 3 billion euro five-year Italian bond sale on Monday hit euro-era highs of 6.29 percent , just a day after former European Commissioner Mario Monti was named to lead the country -- a move that had been hoped would help restore investor confidence.

Italian bond yields rose in the secondary market after the auction, while the 10-year Spanish government bond yield climbed above 6 percent for the first time since August.

More euro zone debt auctions are coming this week, with Spain aiming to sell between 3 billion euros ($4.1 billion) and 4 billion euros of 10-year bonds on Thursday, while France will auction two-year notes on Thursday at a time its triple-A sovereign status is being put under scrutiny given the significant exposure of its banks to Italian, Spanish and Greek debt.

The dollar held steady against the yen at 77.09 yen.

Earlier, the dollar jumped around 40 pips to an intraday high of 77.51 yen. But it quickly gave back its gains, and the dollar is now back near Monday's two-week low around 76.82 yen, the lowest level since Japan's massive yen-selling intervention on Oct. 31.

Market players are bracing for the possibility of further yen-selling intervention, especially if the yen starts to rise sharply.