WORLD FOREX: Major Currencies Rangebound, Focus Turns To US Data

Tuesday, Nov 22, 2011

-- Quiet session ahead of long weekend in the U.S. keeps trading volumes light

-- Major currency pairs range-bound despite pricey Spanish T-bill auction

-- Sterling shrugs off stonger-than-expected U.K. public finances data

-- Busier New York session eyed, with U.S. third-quarter GDP data and FOMC minutes due

By Jessica Mead

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Foreign-exchange traders showed little appetite to push currencies out of existing ranges during a quiet European session Tuesday as a shortened week in the U.S. kept a lid on dealing volumes.

However, concerns over the weakening global economic outlook and the relentless euro-zone debt crisis gnawed away at investor sentiment, limiting the euro's gains against the dollar.

"Generally, the market is a bit tired. People have been very short the euro and I think we're going to see the ranges being held," said Kiran Kowshik, currency strategist at BNP Paribas in London.

The euro ran into hefty sell orders above $1.3550 against the dollar and struggled to build momentum above this level.

Also capping the euro's march higher was an expensive Spanish treasury bill auction and a warning from Fitch Ratings that the new government in Madrid will need to outline additional measures to meet fiscal deficit-reduction targets.

At its first debt sale since weekend elections, the Spanish treasury sold EUR2.978 of three- and six-month T-bills, just shy of the maximum EUR3 billion it was seeking but paid much higher average yields.

"The high cost of even this very short-term financing will do nothing to dispel concern [that] Spanish yields are already at unsustainable levels," said Richard McGuire, senior fixed-income analyst at Rabobank, after it paid an average yield of 5.110% on the three-month T-bills, up from 2.292% at a previous auction for similar maturities.

The downbeat mood also weighed on high-yielding commodity linked currencies like the Australian dollar, which has struggled even against the euro in the past month. The single currency has risen almost 5% against the Australian dollar in the past month, even as the euro has lost ground against the U.S. dollar.

Elsewhere, sterling was unable to capitalize on stronger-than-expected news that the U.K. borrowed less in October than during the year-earlier month and later sank to a session low of $1.5624 against the dollar.

The Norwegian krone strengthened after data showed that third-quarter economic growth was stronger than expected, with core GDP expanding 0.8% compared to the expected 0.7% and second-quarter growth was revised higher.

In the session ahead, traders will be focusing on the second estimate of U.S. third-quarter economic growth due at 1330 GMT and the Federal Open Market Committee's meeting minutes and economic forecast, which will be published at 1900 GMT.

At 1140 GMT, the euro was trading at $1.3564 against the dollar, compared with $1.3490 late Monday in New York, according to trading system EBS. The dollar was at Y76.87 against the yen, compared with Y76.90, while the euro was at Y104.26 compared with Y103.75. Meanwhile, the pound was trading at $1.5676 against the dollar, compared with $1.5641 late Monday in New York.

The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 77.993 compared with 78.319 late Monday 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 1105 GMT     1.3543     76.87      1.5663     0.9124 
3 Day Trend       Range      Range      Bearish    Range 
Weekly Trend      Bearish    Bearish    Bearish    Range 
200 day ma        1.3917     79.24      1.5993     0.8846 
3rd Resistance    1.3670     77.23      1.5888     0.9237 
2nd Resistance    1.3626     77.09      1.5740     0.9209 
1st Resistance    1.3557     77.03      1.5691     0.9187 
Pivot*            1.3487     76.88      1.5688     0.9174 
1st Support       1.3469     76.73      1.5613     0.9114 
2nd Support       1.3421     76.57      1.5545     0.9086 
3rd Support       1.3408     76.30      1.5490     0.8954 
 
 
Forex spot:       EUR/GBP 
 
Spot 1105 GMT     0.8645 
3 Day Trend       Bullish 
Weekly Trend      Bearish 
200 day ma        0.8700 
3rd Resistance    0.8750 
2nd Resistance    0.8705 
1st Resistance    0.8670 
Pivot*            0.8608 
1st Support       0.8621 
2nd Support       0.8585 
3rd Support       0.8519