FOREX-Euro rebound stalls; hemmed in by option expiries

* Euro hemmed in by option expiries at $1.3200/50

* Potential for further rebound after ECB bond buying

* Overall euro downtrend prevails; U.S. jobs data due

(Changes dateline, adds quote, detail, previous TOKYO)

By Neal Armstrong

LONDON, Dec 3 (BestGrowthStock) – The euro steadied on Friday,
hemmed in by option expiries, after reported central bank buying
of Portuguese and Irish debt in recent days soothed investor
nerves and helped the currency rebound from a 2-1/2 month low.

The market’s immediate focus moved to U.S. payrolls data
later in the day, with a surprisingly strong U.S. housing number
on Thrursday adding to budding optimism on the U.S. economy.

The euro stood at $1.3205, little changed on the day and
well above a 2-1/2 month low of $1.2969 plumbed on Tuesday after
massive selling in euro zone periphery government bonds.

Traders said the ECB bought Portuguese and Irish debt on
Thursday, easing investor panic over euro zone debt for now.

Large euro/dollar option expiries at $1.3200 and $1.3250
were limiting moves, while the technical picture was helped by
the euro holding above its 200-day moving average at $1.3123.

Some analysts said the euro’s bounce could have further to
run, given the positioning in the market and thin liquidity.

“The euro has further room to correct to the upside as
strong ECB bond buying will support sentiment and speculative
positioning is short,” said Manuel Oliveri, currency analyst at
UBS in Zurich.

“It can move up to $1.3400/$1.3450 but it remains a sell on
rallies – the overall trend is still down,” he said.

Sentiment towards the smaller euro zone states remained
precariously balanced after Standard and Poor’s warned on
Thursday it may downgrade Greece in three months.

The euro’s 100-day moving average, at around $1.3327, was
seen as the next resistance level. More important resistance
lurked in the $1.3334-64 area, its August peak and a 38.2
percent retracement of its June-November rally.

The sharp fall in the yields on Spanish, Portuguese and
other countries’ bonds offset initial disappointment after ECB
President Jean-Claude Trichet did not explicitly commit the bank
to ramping up bond buying. [ID:nLDE6B10I4]

As widely expected, the ECB extended nonstandard provisions,
committing to provide unlimited one-week, one-month and
three-month funding for vulnerable banks until at least April.


What can the ECB do? [ID:nLDE6AS0F6]

Euro zone debt timeline:

Take a Look on euro debt crisis: [ID:nLDE68T0MG]

Euro zone crisis coverage

Graphic on debt crunch:

U.S. payrolls preview



Traders were looking to the U.S. jobs data, due at 1330 GMT,
which is expected to show an increase of 140,000 jobs last
month, according to a Reuters survey.

Although data on Thursday showed initial jobless claims rose
more than expected, anecdotal evidence of strong holiday sales
and a surprise jump in the house sales index on Thursday boosted
investor risk appetite.

“The impact of today’s U.S. payrolls report on risk appetite
is likely to be the key determinant of the dollar’s response.
Since the trend has been towards stronger data flow in the U.S.,
a weak report is likely to represent a bigger shock to the
market than strength,” said Citibank analysts in a note to

Some traders said a strong jobs figure was likely to
encourage more risk appetite, which could help the euro.

But others said it the dollar could benefit from a strong
number this time given the perception that the U.S. growth
outlook is much more positive than that of the euro zone.

The dollar changed hands at 83.68 yen (JPY=: ), down 0.1
percent from late U.S. levels and off Monday’s two-month high of
84.41 yen. Strong support was seen at the top end of the pair’s
Ichimoku cloud at around 83.18.

(Additional reporting by Hideyuki Sano)

FOREX-Euro rebound stalls; hemmed in by option expiries