WORLD FOREX: Euro Flip Flops in Thin Summer Trading

Tuesday, Aug 14, 2012

--Euro starts session strongly before euro-zone GDP data dents sentiment

--U.S. retail sales data in focus

--Romanian leu gains ground after preliminary deal with IMF, European Commission, World Bank


 
   By Clare Connaghan 
   Of DOW JONES NEWSWIRES

The euro flip-flopped against the dollar Tuesday as data showing the euro-zone economy close to recession dented the early positive sentiment generated from better-than-expected French and German data.

The single currency started the European session strongly, rising to a one-week high against the buck after data showing some growth in Germany and stagnation in France--performances that were both better than economists polled by Dow Jones Newswires had expected--boosted sentiment toward currencies perceived as risky bets.

But the positive momentum didn't last as data showing the 17-country currency bloc's gross domestic product contracted in the second quarter pulled the euro down against the dollar and weighed on the pound and commodity-linked currencies of Australia, New Zealand and Canada.

"The whole of the euro-zone GDP data came in-line with expectations suggesting that if Germany, the Netherlands and France outperformed it means other parts underperformed," said Jane Foley a currency strategist at Rabobank in London.

Further data also cast a pall over the future performance of Germany's economy. The Center for European Economic Research, also known as ZEW, showed German economic expectations unexpectedly fell for a fourth straight month in August to an eight-month low.

"There is little to celebrate in these numbers...it doesn't change the underlying concerns we have," said Rabobank's Foley.

In other news, Greece completed its largest debt sale in two years, ensuring that it will have the money to repay bonds held by the European Central Bank next week. However, the news had little impact in currency markets which continued to drift in extremely thin volumes.

Elsewhere, European equity markets traded with a slightly positive tone, while Spanish and Italian government bond yields eased slightly.

Looking ahead in the U.S., retail sales data will be the main highlight. These are due at 1230 GMT, along with producer price figures, while business inventories are scheduled for release at 1400 GMT.

In emerging markets, the Romanian leu gained ground against the euro after the European Commission, International Monetary Fund and World Bank reached a preliminary agreement on economic measures to be implemented by the government to put the country's economy back on a path of sustainable growth.

"Unwavering political support is needed to ensure implementation of the program measures," the IMF, European Commission and World Bank said in a joint statement. More broadly Central and Eastern Europe currencies were steady.

At 1048 GMT, the euro was trading at $1.2357 against the dollar, compared with $1.2332, late Monday in New York, according to trading system EBS. The dollar was at Y78.53 against the yen, compared with Y78.30 while the euro was at Y97.03, compared with Y96.61. The pound was trading at $1.5702 against the dollar, compared with $1.5684 late Monday in New York.

The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of major currencies, was at 71.489 from 71.55.

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


Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1023 GMT     1.2359     78.54      1.5699     0.9716 
3 Day Trend       Bullish    Range      Bullish    Bearish 
Weekly Trend      Range      Range      Range      Range 
200 day ma        1.2905     79.40      1.5752     0.9375 
3rd Resistance    1.2444     79.17      1.5805     0.9809 
2nd Resistance    1.2395     78.79      1.5777     0.9793 
1st Resistance    1.2386     78.64      1.5731     0.9744 
Pivot*            1.2323     78.29      1.5686     0.9747 
1st Support       1.2325     78.37      1.5658     0.9698 
2nd Support       1.2302     78.16      1.5609     0.9658 
3rd Support       1.2241     77.90      1.5578     0.9612 
 
 
Forex spot:       USD/SEK 
 
Spot 1023 GMT     6.6786 
3 Day Trend       Bearish 
Weekly Trend      Bearish 
200 day ma        6.8380 
3rd Resistance    6.7623 
2nd Resistance    6.7463 
1st Resistance    6.7156 
Pivot*            6.6922 
1st Support       6.6433 
2nd Support       6.5736 
3rd Support       6.5353