FOREX-Dollar supported as G20 meets,charts offer signposts

* Market cautious on G20 meeting but no resolution seen

* Euro capped after repeated failure above $1.40

* Euro/yen chart showing some deterioration

By Charlotte Cooper

TOKYO, Oct 22 (BestGrowthStock) – The dollar sat tight on Friday as
G20 finance ministers began a meeting which players doubt will
yield much progress on the vexed question of currency
depreciations, with charts instead dictating play.

The euro, which corrected sharply lower this week after a
month-long rally, paused after a rebound failed to clear
resistance at $1.4050 on Thursday, and was showing signs of
deterioration on its euro/yen chart.

The dollar index (Read more about the global trade. ) (=USD: )(.DXY: ), which has staged a small
rebound from a 10-month low, needs a sustained break of
resistance at 77.60-65 to keep up momentum for a higher bounce.

For now, though, the market is watching the G20 meeting of
finance ministers and central bankers in South Korea. An informed
source said they were unlikely to reach an accord rejecting
currency devaluations and capping current account balances after
U.S. proposals ran into stiff opposition. [ID:nTOE69K01G]

“It’s too much to expect all these countries to produce
anything meaningful, concrete and binding. Even (U.S. Treasury
Secretary Tim) Geithner said this is a 2-3 year process,” said
Gareth Berry, a currency strategist at UBS in Singapore.

Some saw the possibility of a statement playing down the
notion of a currency conflict, which might offer the dollar some
support near term, but others said any reaction would be brief
and attention would flick back to the other major question of how
big any quantitative easing by the Federal Reserve might be.


For FX PDF “Race to the bottom”

FX graphics

G20 graphic:


With a second round of QE now expected, the major currencies
have established holding patterns as the market awaits events.

The euro was up 0.1 percent at $1.3934 (EUR=: ), with initial
support at about $1.3870, Thursday’s low and a 50 percent
retracement of its rebound from this week’s $1.3697 low, then at
$1.3820-30 and $1.3775.

Initial resistance is plotted at $1.3960 with bigger
resistance at Thursday’s high around $1.4050, where a break would
open up for a re-test of $1.4161, the top of the recent rally and
its highest level since January.

The euro slipped 0.1 percent to 113.11 yen (EURJPY=R: ), with
selling appearing to come from hedge funds or institutional
investors, a Japanese bank trader said.

Euro/yen’s outlook has deteriorated on its daily Ichimoku
charts, popular among Japanese traders, as its tenkan line, now
at 113.16, has dropped below its kijun line, now at 113.55, for
the first time since Japan’s intervention on Sept. 15.

Dollar/yen slipped 0.2 percent to 81.17 yen (JPY=: ), still
holding above its latest 15-year low of 80.84 yen set this week
and keeping away from its record postwar low of 79.75 set in

Wariness about intervention has kept the dollar supported,
after Japan intervened in September for the first time in six

“People are just not quite sure what Japan’s tactics are on
the currency and how afraid they should be. But clearly there
is a little bit of unease about putting on a fresh short
position from here,” said Sean Callow, a currency strategist at
Westpac Bank in Sydney.

Still, any rallies rapidly meet with selling, likely by
Japanese exporters, and the dollar failed to rise back above
82.00 yen even when it was correcting higher against other
currencies this week.

Prospects for the Fed to pump more money into the economy
next month, likely through direct purchases of Treasury debt,
have pushed the dollar down more than 7 percent against other
major currencies since September.

The dollar index (Read more about the global trade. ) (.DXY: ), which tracks the greenback
versus a basket of six major currencies, was flat at 77.404,
above a recent 10-month low of 76.144 but still well off highs
around 83 seen last month.

Immediate resistance stood at 77.65, with major resistance
around 78.35, about the high of Wednesday trade.

It has major trend line support at 76.10, which could limit
its downside, although a break there could open the way to last
November’s low at 74.17.

“Another downleg in DXY would require taking out these
thresholds (76.10), which would likely require another round of
distinct USD bearishness,” said David Watt, a senior currency
strategist at RBC Dominion Securities in Toronto.
(Additional reporting by Ian Chua in Sydney and Hideyuki Sano in
Tokyo; contribution by Reuters FX analyst Krishna Kumar; Editing
by Michael Watson)

FOREX-Dollar supported as G20 meets,charts offer signposts