Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

FOREX-Euro near 2-month low, Aussie slips after RBA

Published 11/25/2010, 08:04 PM
Updated 11/25/2010, 08:08 PM

* Euro still weighed down by growing debt woes

* Aussie down as RBA dampens chance of near-term rate hike

* Yen near 7-week low but Japanese exporters bids support

By Hideyuki Sano

TOKYO, Nov 26 (Reuters) - The euro dangled near a two-month low against the dollar on Friday on worries over euro zone countries' debt financing, while the Australian dollar tumbled after the central bank quashed chances of an imminent rate hike.

A relentless rise in euro countries' bond yields kept currency traders focused on euro zone malaise, and many traders say the euro's technical outlook is bleak.

"We've been hearing one piece of bad news after another from the euro zone lately. There's even talk of a breakup of the euro zone," said Tsutomu Soma, manager of foreign securities at Okasan Securities.

The euro dipped 0.1 percent to $1.3343 in early trade, within striking distance of Wednesday's two-month low of $1.3284.

Resistance is expected at around $1.3365-70, its 90-day moving average as well as the bottom of the cloud in its daily ichimoku chart.

On the other hand a break below the latest low could put the pair's trendline support at $1.3230 as the next target, followed by its 200-day moving average at around $1.3135.

A break below the 200-day moving average could be seen as more evidence of its medium-term weakness after its break below major supports, including a 38.2 percent retracement of its rally from June to early November.

The euro's rally earlier this year was in part helped by the fact that the European Central Bank was seeking an exit strategy from its loose policy, in contrast with the Federal Reserve and the Bank of Japan, which took more easing steps in recent months.

But some market players say that may change soon.

"Because of the debt woes, euro zone countries will now have to tighten their fiscal policy, which will dent growth and put pressure on the ECB to give up its search for an exit sooner or later," said Daisuke Karakama, a market economist at Mizuho Corporate Bank.

"The ECB may say it will extend its offer of unlimited liquidity as early as its next policy meeting (next Thursday,)" Karakama said. The ECB extended the measure to early 2011 in September.

The Australian dollar fell after Reserve Bank of Australia Governor Glenn Stevens dampened any remaining prospect of an imminent interest rate hike, saying rates were just at right and that the bank might not move on policy for some time.

The Aussie fell 0.5 percent to $0.9758, dropping below its 55-day moving average, now at $0.9777. Some stop-loss sell orders are seen below $0.9750 and $0.9720.

A critical support point is at around $0.9650, a low hit in late October, said Okasan Securities' Soma.

"There will likely be more position unwinding until early December. But the Aussie will also enjoy persistent buying. At a time when both the dollar and euro look fragile, money will flow to commodity currencies like the Aussie," Soma said.

The dollar rose slightly against the yen to 83.72 yen, near a seven-week high of 83.85 yen.. But selling by Japanese exporters is likely to keep the dollar's advance in check, traders said. (Additional reporting by Koh Gui Qing and Reuters FX analysts Krishna Kumar in Sydney and Rick Lloyd in Singapore)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.