Reuters: US Dollar Report: FOREX-Euro drops 4th day vs dollar as uncertainty weighs

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FOREX-Euro drops 4th day vs dollar as uncertainty weighs May 3rd 2012, 18:56 Thu May 3, 2012 2:56pm EDT * ECB's Draghi comments buoy euro; but door open to easing * EUR/USD volatility falls, but support ahead of US jobs By Julie Haviv NEW YORK, May 3 (Reuters) - The euro slipped against the dollar from a fourth straight day o n T hursday as European Central Bank chief Mario Draghi gave a more upbeat than expected assessment of the region's economy but left the door open for policy easing. The euro bounced from a two-week low against the greenback after Draghi said the euro zone economy was likely to recover this year, although the outlook remained vulnerable to downside risks. He spoke after the ECB kept rates unchanged at 1 percent. While the euro initially rose after Draghi's comments, the "market reaction soon became muted because the ECB really did not change anything and it was pretty much status quo," said Mark McCormick, G-10 currency strategist at Brown Brothers Harriman in New York. "ECB action is still possible," he said. "If the market thought easing was off the table, the euro would be stronger today and as we head into a weekend that should have headline risk, with elections in France and Greece, few people want to go long the euro." The euro hit session highs at $1.3180 after earlier falling to two-week lows at $1.3097. It was last trading at $1.3146, down 0.1 percent on the day. Technical charts showed the euro was still in a consolidation pattern. A breakout from the $1.2994-$1.3282 range is needed for a clearer near-term outlook. On the upside, a break of $1.3283 - the high hit on May 1 - will indicate that the consolidation from the Feb. 29 peak of $1.3486 has been completed and a rebound from this year's low of $1.2624 is resuming, analysts said. The euro gained against the Japanese yen and last traded at 105.54, up 0.2 percent. "Lower (ECB) rates remain a distinct possibility in our view, but those hoping for an imminent cut have been disappointed," Credit Suisse said. "While the downside risks to growth language leave the door ajar, crossing the threshold remains data dependent." In the options market, one-month at-the-money implied volatility in euro/dollar fell to 8.60 percent from 9.05 percent previously. Volatility rose as high as 9.25 percent on Wednesday. Volatility, however, should remain underpinned ahead of the French and Greek elections as well as Friday's U.S. non-farm payrolls report for April. There was some buying of June $1.35 euro calls, but put interest saw the heaviest volume, an options broker said. Three-month euro/dollar risk reversals remained biased to puts, trading at -2.3 vols, unchanged from Wednesday, but up from -2.1 vols a week earlier. The more immediate risk for the euro, however, comes from the French and Greek elections. Opinion polls showed socialist Francois Hollande will be elected the next French president. . In Greece, surveys showed no clear winner emerging from the elections, with the two main parties garnering barely enough seats for a parliamentary majority. The dollar, meanwhile, rose 0.2 percent against the yen to 80.30 yen, supported in early trade by a fall in weekly U.S. jobless claims. ) Link this Share this Digg this Email Reprints

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