FOREX-Euro inches up after fall, Bernanke in focus

* Profit-taking may keep euro under pressure until Friday

* Fed Chairman Bernanke’s testimony before Congress in focus

* Euro bids seen at $1.2860/65 and below

By Rika Otsuka

TOKYO, July 21 (BestGrowthStock) – The euro inched up against the
dollar on Wednesday, after being knocked from a 10-week high
above $1.3000 the previous day due to profit-taking ahead of euro
zone bank stress test results this week.

The euro stood at $1.2895 (EUR=: ), up 0.1 percent from late
U.S. trade. It rose as far as $1.3029 on trading platform EBS on
Tuesday, its highest since May 10, but has been unable to hold
above $1.3000 after testing it for three days in a row.

Traders said players were likely to keep taking profits in
the near term on the euro’s sharp rally which has taken it up
more than 8 percent since it hit a 4-year low of $1.1876 in early
June.

But there was also talk of bids in the euro at $1.2860/65 and
then at $1.2820, with a mixture of stop-loss sell orders and bids
then expected around $1.2780/2800. On the charts, former
resistance at about $1.2770-90 has now turned into support.

Losses in the euro are expected to be limited before the
stress test announcements due on Friday, with some analysts
saying the results could soothe concerns about how European banks
would cope with a deterioration in the region’s economy and
financial markets.

“Players want to trim long euro positions as they have kept
buying euros since early June,” said Tsutomu Soma, senior manager
of the foreign securities department at Okasan Securities.

“But many continue to bet the euro will remain on an upward
trend, partly due to the dollar’s weakness.”

Analysts at Bank of Tokyo-Mitsubishi UFJ said in a note the
euro/dollar might find additional strength after its 21-day
moving average crossed up through its 65-day moving average on
Tuesday, forming a “Golden Cross” which can sometimes precede
gains.

Against the Japanese currency, the euro dipped 0.1 percent to
112.55 yen (EURJPY=R: ).

The dollar fell 0.3 percent to 87.21 yen (JPY=: ), staying
above a 7-month trough of 86.27 yen struck on EBS last week.

A string of weaker-than-expected data in recent weeks has
fanned fears about a slowing U.S. recovery, prompting investors
to cut long positions in the greenback.

Data showed on Tuesday that U.S. housing starts fell more
than expected in June to their lowest level in eight months,
further evidence that the economy has lost momentum in the second
quarter. [ID:nN20249501]

Traders said the dollar is under pressure partly because
expectations for a U.S. interest hike in 2011 are fading.

The market is focused for now on Fed Chairman Ben Bernanke’s
semi-annual testimony before Congress on Wednesday and Thursday,
with investors looking for any comments that could boost
speculation about more monetary accommodation.

“Bernanke could hint at further monetary policy easing,
although the possibility of actually relaxing the Fed’s policy is
nearly zero,” said Hideki Hayashi, global economist at Mizuho
Securities.

“Such a hint is likely to warm up investor appetite, lifting
share prices.”

But how that could move the dollar’s exchange rates is hard
to predict, Hayashi said.

Last week, the Federal Reserve downgraded its economic
outlook for this year but stuck with its prediction of trend to
above-trend growth in 2011.
Stock Market Money

(Addditional contribution by Reuters FX analyst Rick Lloyd in
Singapore; Editing by Charlotte Cooper)

FOREX-Euro inches up after fall, Bernanke in focus