FOREX-Euro recovers in thin trade; Aussie rallies

* Euro up on stop-loss, model players’ buying in thin trade

* Dollar hits 3-week low vs yen, 7-week low vs Aussie

(Updates prices; changes byline, previous TOKYO)

By Jessica Mortimer

LONDON, Dec 28 (BestGrowthStock) – The euro gained on Tuesday,
recovering from recent weak levels, while the dollar came under
broad selling pressure, hitting a three-week low against the yen
and a seven-week low against the Australian dollar.

The euro jumped after stop-loss orders were triggered at key
chart points around $1.32. It rose to $1.3254 (EUR=: ), its best
level in more than a week and extending its recovery from last
week’s three-week low of $1.3055.

The move came in very illiquid markets, with public holidays
in the UK and Australia causing thin volumes and erratic trade,
while concerns about debt problems in peripheral euro zone
countries were expected to cap any euro gains.

Euro bears had been frustrated by the currency’s firm
support for more than a week at its 200-day moving average just
below $1.31 and were giving up their positions for now.

“Liquidity is very thin and there are no major drivers at
the moment. The euro is oscillating in thin volumes, no new news
is expected on the euro zone periphery and it would take a
strong driver to pull the euro out of its $1.31-$1.33 range,”
said Stephan Maier, currency strategist at Unicredit in Milan.

Many in the market expect to see more euro weakness in the
new year, however, due to worries some euro zone countries such
as Spain and Portugal may need rescue programmes, tracking a
path trodden by Greece and Ireland.

The euro (EUR=: ) was up 0.5 percent at $1.3220.

Its next target is $1.3278, a 50 percent retracement of its
fall earlier this month from $1.3500 to $1.3055, and then around
$1.3330-35, which includes a 61.8 percent retracement of the
same decline as well as the pair’s peak in August.

“Essentially the euro is rising on short-covering. I think
we’ll need to watch the market a bit more to see how investors
plan to allocate their money after Christmas and in the new
year,” said Estuko Yamashita, chief economist at Sumitomo Mitsui
Banking Corp in Tokyo.

Broad rises in commodity prices helped buoy the Australian
dollar (AUD=D4: ), which was up 0.4 percent against the U.S.
dollar at $1.0084, having hit $1.0092, its strongest since Nov.
11 to take it closer to a 28-year high of $1.0182.


Sentiment towards the euro remained fragile and many traders
think it could retest its Nov. 30 low of $1.2969. It stayed weak
against the safe-haven Swiss franc, down 0.4 percent at 1.2580
francs (EURCHF=: ).

The latest positioning data showed speculators increased
bets against the euro in the week ending Dec. 21, while they
trimmed bets against the U.S. dollar and boosted long positions
in the Swiss franc. [IMM/FX]

In one positive sign for the single currency, however, hedge
funds’ exposure has shrunk from an overstretched position last
month to a more balanced level, said Todd Elmer, head of G10
strategy for ex-Japan Asia for Citi in Singapore.

But he added this was just one of many preconditions the
euro must meet before returning to a recovery path.

The dollar was down 0.6 percent against a basket of
currencies (.DXY: ) at 79.925, having hit an 11-day low of 79.838.

The dollar also dropped to a three-week low around 82.37 yen
(JPY=: ), down 0.5 percent on the day, pressured by offers from
Japanese exporters, many of whom will be away later this week
for the year-end and New Year holidays.

“U.S. bond yields fell yesterday. I think that’s marginally
negative for the dollar,” said a trader at a Japanese bank in

U.S. bond yields eased after a two-year note auction
attracted buyers, although a heavy snow storm in the
northeastern United States made a holiday market even thinner
and yields crept up slightly in Asia. [US/]

The dollar slipped below key support at its 55-day moving
average around 82.59 yen and barely clung to support around
82.40 yen, the bottom of a daily ichimoku cloud.
(Additional reporting by Hideyuki Sano in Tokyo, Editing by
Catherine Evans)

FOREX-Euro recovers in thin trade; Aussie rallies