Euro Steadies as Traders Look Ahead to Fed Speakers, ECB

Date : 01/07/2013 @ 8:03AM
Source : Dow Jones News

Euro Steadies as Traders Look Ahead to Fed Speakers, ECB

-- Euro steadies but underlying tone negative as traders mull US policy outlook

-- Looming ECB rate decision adds to drag

-- Yen stays weak as investors eye BOJ inflation target

   By Alexandra Fletcher 

The euro steadied in European trade Monday but its underlying tone against the dollar remained negative as traders recalled the previous week's hint from the Federal Reserve that an end to U.S. monetary easing might yet be in sight and focused on the European Central Bank's next interest rate decision.

The euro shied away from a return to $1.30, having briefly weakened below that level in Friday trade, but remained more than 1% down in the year-to-date period as investors awaited further clues from the Fed policymakers scheduled to speak later in the week.

European shares and US stock index futures were also weaker as equity investors awaited this week's start of the fourth- quarter earnings season.

In the absence of new economic data, currency traders continued to mull the Fed's December Federal Open Market Committee minutes Thursday in which policymakers at the U.S. central bank reminded the market that monetary stimulus will be withdrawn at some point.

Three regional Fed presidents speaking this week are likely to address the topic. St. Louis President James Bullard, Kansas City President Esther George and Minneapolis President Narayana Kocherlakota speak Thursday while Philadelphia President Charles Plosser speaks Friday.

"All bar one of the Fed speakers scheduled to speak this week are likely to be hawkish," said Jane Foley, senior foreign exchange strategist at Rabobank in London.

"If they too suggest that [quantitative easing] will end sooner rather than later then that is likely to send Treasury yields higher and therefore support the dollar further," she said.

The ECB's meeting Thursday also weighed on the euro, with some economists, including those at Morgan Stanley, saying an interest rate is cut possible.

The yen also continued to sag against the dollar after Japanese Prime Minister Abe declared his government would consider changing the law governing the Bank of Japan if the central bank doesn't set an inflation target of 2% voluntarily at its next policy meeting.

Currency strategists at Citigroup said in a note to clients that the market is pricing in more radical changes to policy such as a greater increase of the asset buying program.

The pound rebounded slightly against the dollar. The Bank of England, also due to meet Thursday, is expected by economists to keep super-low interest rates on hold.

The Romanian leu was unmoved after the country's central bank left its rates on hold at 5.25% for a sixth consecutive month.

At 1217 GMT, the euro was trading at $1.3035 against the dollar, compared with $1.3070 late Friday in New York, according to trading system EBS. The dollar was at Y87.89 against the yen, compared with Y88.16, while the euro was at Y114.55, compared with Y115.22. Meanwhile, the pound was trading $1.6065 against the dollar, compared with $1.6069 late Friday in New York.

The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 71.095 from about 71.063.

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

Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
Spot 1103 GMT     1.3042     87.88      1.6060     0.9268 
3 Day Trend       Bearish    Bullish    Bearish    Bullish 
Weekly Trend      Bearish    Bullish    Bearish    Bullish 
200 day ma        1.2928     80.63      1.5950     0.9348 
3rd Resistance    1.3180     88.75      1.6135     0.9383 
2nd Resistance    1.3123     88.48      1.6117     0.9350 
1st Resistance    1.3091     88.18      1.6076     0.9303 
Pivot*            1.3053     87.96      1.6065     0.9260 
1st Support       1.2998     87.60      1.6010     0.9231 
2nd Support       1.2974     87.35      1.5962     0.9175 
3rd Support       1.2962     86.50      1.5943     0.9135 
Forex spot:       AUD/USD 
Spot 1103 GMT     1.0505 
3 Day Trend       Bullish 
Weekly Trend      Bullish 
200 day ma        1.0358 
3rd Resistance    1.0587 
2nd Resistance    1.0525 
1st Resistance    1.0529 
Pivot*            1.0481 
1st Support       1.0465 
2nd Support       1.0430 
3rd Support       1.0394 

(Dow Jones Technical Strategist Francis Bray contributed to this story.)

Write to Alexandra Fletcher at

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