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28.12.2010 11:54

EU session review: Euro bounces back, dollar falls broadly

Data released
07:00    Switzerland UBS Consumption Indicator (Nov)     1.63        1.72

The euro rose sharply as bears were forced to abandon their bets on Tuesday while the dollar came under broad selling pressure, hitting a three-week low against the yen and a seven-week low against the Australian dollar.
The euro jumped after stop-loss orders were triggered around $1.3200. Euro bears had been frustrated by the currency's firm support for more than a week at its 200-day moving average just below $1.31 and were giving up their positions for now.
Many in the market have been betting on more weakness in the euro due to persistent worries that some euro zone countries such as Spain and Portugal may need rescue programmes to finance their debt, tracking a path trodden by Greece and Ireland.
"It's a flow-driven market so it's hard to tell how long this rise in the euro will continue," said a trader at a European bank.
The euro could target $1.3278, a 50% retracement of its fall earlier this month from $1.3500 to $1.3055, and then around $1.3330-35, which includes a 61.8% retracement of the same decline as well as the pair's peak in August.
"Essentially the euro is rising on short-covering. I think we'll need to watch the market a bit more to see how investors plan to allocate their money after Christmas and in the new year," said Estuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp.
Sentiment towards the euro remains fragile and many traders think it could retest the Nov. 30 low of $1.2969.
The dollar was weaker against most other major currencies, falling to a seven-week low against the Australian dollar.
"U.S. bond yields fell yesterday. I think that's marginally negative for the dollar," said a trader at a Japanese bank.
The dollar also dropped to a three-week low of 82.40 yen, pressured by offers from Japanese exporters, many of which will be away later this week for the year-end and New Year holidays.
The dollar slipped below key support at its 55-day moving average around 82.62 yen and barely clung to support around 82.40 yen, the bottom of a daily ichimoku cloud.

EUR/USD printed session low on $1.3209 before it resumed its gains and currently holds around $1.3270.

GBP/USD fell from $1.5490 to $1.5410. But bulls were back on the market and rate recovered to session highs.

USD/JPY triggered some supports and still under pressure, holding under Y82.00.

US data starts at 1400GMT with S&P/Case-Shiller Home Price Indices
Later data includes Consumer confidence at 1500GMT.

28.12.2010 12:29

Itochu Corp. on yen

28.12.2010 11:14

Gold rises

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