WORLD FOREX:EU Summit Inspires Euro,Aussie Dollar Relief Rally

Thursday, Oct 27, 2011

-- Relief rally dominates European session; euro and Australian dollar at seven-week highs

-- Dollar under pressure, keeps yen supported despite official rhetoric

-- Emerging markets also benefit with exception of the Hungarian forint

-- Traders focusing on third-quarter U.S. GDP figures at 1230 GMT


 
   By Jessica Mead 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Relieved traders pushed the euro and other currencies seen as risky bets up to seven-week highs against the dollar Thursday after European leaders managed to thrash out an 11th-hour deal on Greek debt and bank recapitalization.

The lack of details was of little importance; the fact that any deal at all had been struck was sufficient to alleviate traders' worst fears.

"Credit where credit is due, this is a substantial outcome given where these muppets were only a few days ago," said one analyst.

The euro traded as high as $1.4038 against the dollar at the start of the European session while the Australian dollar broke back above $1.06 for the first time since Sept. 9. Indeed, the Aussie dollar was notching up gains against the dollar even faster than the euro's could, indicating that this is a broad-based relief rally.

"European policymakers have bought themselves time and people don't like the dollar. Dollar weakness is the name of the game at the moment. People want to sell dollars, that's the principal guiding factor in the market," said Neil Mellor, currency strategist at the Bank of New York Mellon in London.

The yen also inched higher on the back of the dollar's weakness despite Japanese Finance Minister Jun Azumi reiterating his concern about speculative yen moves. But Mellor warned that Azumi's jawboning was way past its shelf life and the fall in the dollar against the yen was "clearly testimony to how weak sentiment is about the dollar right now."

Emerging European currencies also broadly benefited from the improvement in market sentiment, with the notable exception of the Hungarian forint, which is trading near its weakest level against the euro since early April 2009 on fears of a sovereign downgrade. The euro traded as high as HUF302.17 against the forint.

Hungary rejected all bids at a 12-month Treasury bill auction after comments from Hungarian Economy Minister Gyorgy Matolcsy that Hungary's sovereign rating may be downgraded.

Elsewhere, the Swedish Riksbank kept its benchmark interest rate unchanged at 2% as expected but also revised down its interest rate forecasts for the next few years. But currency strategists said the Riksbank wasn't as cautious as it could have been, which helped to underpin the Swedish krona against the euro.

Looking into the session ahead, traders will be focusing on the advance estimate of third-quarter U.S. GDP, which is due out at 1230 GMT. The consensus is for the world's largest economy to grow 2.7% on the quarter, well above the 1.3% growth rate in the three months to June.

At 1031 GMT, the euro was trading at $1.4020 against the dollar, compared with $1.3906 late Wednesday in New York, according to trading system EBS. The dollar was at Y75.78 against the yen, compared with Y76.16, while the euro was at Y106.25 compared with Y105.98. Meanwhile, the pound was trading at $1.6210 against the dollar, compared with $1.5981 late Wednesday in New York.

The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 75.644 compared with 76.209 late Wednesday 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 1033 GMT     1.4018     75.78      1.5997     0.8744 
3 Day Trend       Bullish    Bearish    Bullish    Bearish 
Weekly Trend      Bullish    Bearish    Bullish    Bearish 
200 day ma        1.3959     79.62      1.6004     0.8819 
3rd Resistance    1.4084     76.33      1.6115     0.8929 
2nd Resistance    1.4055     76.29      1.6070     0.8860 
1st Resistance    1.4038     75.97      1.6041     0.8805 
Pivot*            1.3893     76.07      1.5971     0.8799 
1st Support       1.3950     75.70      1.5924     0.8729 
2nd Support       1.3865     75.25      1.5891     0.8698 
3rd Support       1.3776     75.00      1.5850     0.8645 
 
 
Forex spot:       EUR/AUD 
 
Spot 1034 GMT     1.3207 
3 Day Trend       Bearish 
Weekly Trend      Bearish 
200 day ma        1.3614 
3rd Resistance    1.3353 
2nd Resistance    1.3311 
1st Resistance    1.3240 
Pivot*            1.0441 
1st Support       1.3171 
2nd Support       1.3047 
3rd Support       1.3000