WORLD FOREX: Currency Market Takes Breather Ahead Greek Denouement

Wednesday, Mar 07, 2012

-- Euro, Australian dollar steadier after run of losses.

-- Markets braced for double dose of major news on Greece, U.S. economy

-- Polish zloty steady after rates left unchanged


 
   By William Kemble-Diaz 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The euro and Australian dollar were steadier in European trading Wednesday after a recent run of losses against the dollar and yen, as traders braced for an end-of-week crescendo of news on Greece's long-awaited debt restructuring and on the U.S. economic recovery.

With private creditors facing a 2000 GMT Thursday deadline to sign up to a deal to write down 53.5% of EUR177 billion in Greek debt and with closely watched U.S. jobs data due Friday, the Australian dollar stabilised above $1.0550 against the dollar while the euro traded near $1.3150.

Weaker-than-expected German manufacturing data dented some of the euro's early-session gains but the currency remained some way off Tuesday's lows, having previously retraced about 40% of its rally to late-February's high of $1.3486 from Jan. 13's low of $1.2624.

Greece remains optimistic that it will achieve a 75%-80% participation rate in its debt-swap deal but that would still fall short of the 90% needed to avoid the activation of collective action clauses that will rope in unwilling investors. The worse-case scenario though is of an even lower participation rate.

"If we don't get enough creditor participation to trigger CACs the likely outcome would be a sharp euro selloff on the back of escalating concerns about disorderly Greek default," Citigroup currency strategist Valentin Marinov said.

Some market observers said the sell-off in higher yielding currencies like the Australian dollar had further to run but was just a temporary correction in an otherwise improving market. But a lot could depend on the U.S. employment report.

Rather than Greek events, Standard Bank strategist Steven Barrow put the week's cautious mood down to Chinese worries--namely China's cut in its growth projections. So with one growth stalwart of the global economy faltering, Friday's U.S. nonfarm payrolls data took on even greater importance.

Marinov said better-than-expected U.S. jobs data could boost demand for higher yielding currencies against the dollar but added that the euro would underperform in such a scenario.

"The euro is less likely to benefit from that given the lingering uncertainty about Greece and the fact that a strong NFP print will likely keep the interest rate differential between the U.S. and euro-zone under the pressure," he said.

Elsewhere, the Norwegian krone firmed, inching back toward its recent nine-year high against the euro after Norges Bank governor Oystein Olsen failed to mention the currency's recent appreciation in a scheduled speech.

The Polish zloty surrendered some of its early gains and remained steady after the country's central bank stood pat on interest rates. The Brazilian real was also steady ahead of a rate decision.

At 1200 GMT, the euro was trading at $1.3134 against the dollar, compared with $1.3112 late Tuesday in New York, according to trading system EBS. The dollar was at Y80.72 against the yen, compared with Y80.88, while the euro was at Y106.02 compared with Y106.08. The pound was trading at $1.5730 against the dollar, compared with $1.5718 late Tuesday in New York.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was trading at 79.724, compared with 79.808 late Tuesday in New York.

A summary of key levels for chart-watching technical strategists is below:


 
Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1135 GMT     1.3136     80.74      1.5724     0.9177 
3 Day Trend       Bearish    Bearish    Bearish    Bullish 
Weekly Trend      Bearish    Bullish    Range      Range 
200 day ma        1.3495     78.64      1.5815     0.9061 
3rd Resistance    1.3242     81.59      1.5881     0.9300 
2nd Resistance    1.3212     81.15      1.5791     0.9214 
1st Resistance    1.3165     80.94      1.5757     0.9196 
Pivot*            1.3147     81.02      1.5766     0.9166 
1st Support       1.3121     80.58      1.5697     0.9150 
2nd Support       1.3103     80.42      1.5645     0.9106 
3rd Support       1.2974     80.25      1.5550     0.9066 
 
 
Forex spot:       NOK/SEK 
 
Spot 1136 GMT     1.1974 
3 Day Trend       Bullish 
Weekly Trend      Bullish 
200 day ma        1.1661 
3rd Resistance    1.2421 
2nd Resistance    1.2271 
1st Resistance    1.2023 
Pivot*            1.1914 
1st Support       1.1929 
2nd Support       1.1905 
3rd Support       1.1894