FOREX-Euro limps off lows but seen vulnerable

* Euro on hold but looks weak on charts

* Strong Chinese trade data marginally helps risk currencies

* But expectations of Chinese rate hike overwhelm

By Ian Chua and Hideyuki Sano

TOKYO, Dec 10 (BestGrowthStock) – The euro gained some reprieve on
Friday, but fears of more problems emerging from the euro zone’s
fiscal mess and doubts over whether U.S. bond yields have peaked
kept traders cautious of chasing it higher.

While strong Chinese export and import figures provided
commodity currencies such as the Australian dollar with a minor
lift, expectations of a rate hike by Chinese authorities as soon
as this weekend kept buying to a minimum.

The euro last traded at $1.3243 (EUR=: ), barely changed from
late New York levels and having pulled off a low of $1.3164 on
trading platform EBS.

Still, the currency’s intraday highs have been getting lower
since Monday, normally a sign of an imminent move down.

“I still think the bias is for the dollar to rise in
general. U.S. bond markets seem to have calmed down for now. But
if we have strong U.S. data on retail sales and so on, their
yields could easily rise again,” said a trader at a Japanese
brokerage house.

The next key target for the euro is at $1.3150, followed by
its 200-day moving average around $1.3115. Traders see the euro
falling back to its December low of $1.2970 in the coming weeks.

“Short-term risks remain to the downside for the euro
because the peripheral problems remain unresolved,” said Paul
Robinson, strategist at Barclays Capital.

Fitch became the first ratings agency to strip Ireland of
its A credit status on Thursday, slashing it by three notches to
BBB+, pointing to the fiscal costs of restructuring.

Ireland’s government will also seek parliamentary approval
for an 85 billion euro ($113 billion) IMF/EU rescue package next
week. [ID:nLDE6B81XS]

While the downgrade did not help the euro, the currency’s
rebound from its low suggested problems in Ireland may no longer
be having a major impact on the euro, as traders shift focus to
the bigger economies in the euro zone such as Spain, some market
players said.

“The euro reacted well to the Fitch news on Ireland and that
really tells you that maybe this story is too well known and
traders don’t really want to sell it,” said Robert Rennie, chief
currency strategist at Westpac Bank.

CHOPPY SESSION

Thin year-end volumes are likely to make for a choppy
session, traders said.

“The market is getting thin, making prices moves susceptible
to big flows. This is a market where you shouldn’t expect too
much logic,” said a trader at a U.S. bank.

The dollar (.DXY: ) index, which tracks the greenback’s
performance against a basket of major currencies, was little
changed at 79.99, struggling to break through the 80.00-81.50
barrier that capped its November rally.

Against the Japanese currency, the greenback last traded at
83.75 yen (JPY=: ), not far off a session low around 83.50 yen
plumbed following the Treasury auction, which showed healthy
foreign demand for the longer-dated U.S. debt. [ID:nN09493895]

The dollar’s 14-day, 21-day and 90-day moving averages as
well as the ichimoku tenkan line are all clustered around
83.40-60, making the area a strong support level.

But the greenback’s repeated failure since late last month
to take out resistance around 84.40 is encouraging many traders
to take profits near that level, leading to expectations that
its 83.50-84.50 range will persist for now.

“The possibility of a Chinese rate hike is an obstacle for
the dollar/yen to test 85 yen,” said Etsuko Yamashita, chief
economist at Sumitomo Mitsui Banking Corp.

Expectations of Chinese tightening also kept the
growth-linked Australian dollar on a leash.

The Australian dollar rose 0.1 percent to $0.9852 (AUD=D4: )
helped by data showing growth in both Chinese imports and
exports beat expectations in November.

But the currency kept some distance from Tuesday’s 3-