FOREX-Euro eases from 2-month high; Aussie jumps

* Euro up 0.1 pct at $1.2955 (EUR=: )

* Yen down on Japanese importers, intervention risk

* Aussie rises; Chinese shares’ gain overrides RBA minutes

* U.S. housing starts eyed; poor data may hurt dollar

(Adds quote, updates prices)

By Tamawa Desai

LONDON, July 20 (BestGrowthStock) – The euro eased a bit after
hitting a two-month high against the dollar on Tuesday, but
remained supported as weak U.S. economic data hurt the

The euro rose as high as $1.3029 on trading platform EBS,
with dealers saying key stop-losses — closing of positions to
cap loss-making trades — had been taken out around $1.3010,
with more above $1.3030. By 0929 GMT, it was up 0.1 percent on
the day at $1.2955 (EUR=: ).

Support for the euro is seen around the previous day’s low
of $1.2870. Resistance is seen around $1.3113, a Fibonacci
retracement of its decline from last December to early June.

“Sentiment toward the euro is quite positive,” said Lutz
Karpowitz, senior currency strategist at Commerzbank in

“The short-term sovereign debt problems seem to be under
control, and data out of the U.S. is weighing on the dollar.”

Traders said that options at a strike price of $1.2950 and
$1.3000 set to expire later in the day may limit the upside.

Risk sentiment grew after Chinese shares rose 2 percent but
European shares reversed course and were down 0.6 percent
(.FTEU3: ) by midday trade.

Results of European Union bank stress tests due out on
Friday are expected to soothe market concerns about the region’s
banking system, even though some banks are not expected to pass
the test.

Nationalised German lender Hypo Real Estate is expected to
fail the test, a source familiar with the matter said on Monday.

“That would mean the test scenarios are working. If all of
the banks passed, the market would say the tests were
unrealistic,” Commerzbank’s Karpowitz said.

The euro has also shrugged off potentially damaging news
such as Ireland’s debt downgrade by Moody’s ratings agency on
Monday and a breakdown in talks between Hungary and
international lenders at the weekend.

But some analysts say the euro could be in for a “buy on the
rumour sell on fact” retreat after the stress test results,
having risen nearly 10 percent from a four-year low.

“While we would expect the euro to extend gains towards the
$1.3115 area over the next couple of days … the euro is likely
to struggle from here given the recent strong gains over the
course of the past month,” BNP analysts said in a note.


The yen remained near a seven-month high against the dollar,
prompting market players to look to what authorities in Japan
could do about a firmer yen.

The dollar was up 0.1 percent on the day at 86.83 yen
(JPY=: ), but not far from a low of 86.27 hit on trading platform
EBS on Friday.

Traders suspect Japanese officials would not want to see the
85 level breached in a hurry, though many traders doubt Tokyo is
ready to intervene at this point.

“I guess the authorities will be nervous. There will be
verbal intervention or they might do rate checks as they did
before. But I don’t think they can do actual intervention,” said
a trader at a Japanese financial institution.

The dollar was down 0.3 percent against the Canadian dollar
at C$1.0514. Markets expect the Bank of Canada to raise interest
rates by 25 basis points on Tuesday. [ID:nN14133612]

The market was also awaiting the release of U.S. housing
starts data for June after data on Monday showed the NAHB/Wells
Fargo Housing Market index fell more than expected in July to
its lowest level since April 2009. [ID:nN19191144]

The Australian dollar (AUD=D4: ) rose 1.1 percent to $0.8778.

It recovered on rising Chinese shares after losing ground as
minutes from the Reserve Bank of Australia’s July policy meeting
suggested it was unlikely to raise interest rates next month if
coming inflation data moderated as expected. [ID:nCBR000068]

Stock Market Trading

(Additional reporting by Hideyuki Sano in Tokyo; Editing by
Susan Fenton)

FOREX-Euro eases from 2-month high; Aussie jumps