Reuters: US Dollar Report: FOREX-Euro off 7-week high, weighed down by Spain auction, weak data

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FOREX-Euro off 7-week high, weighed down by Spain auction, weak data Dec 5th 2012, 17:30 Wed Dec 5, 2012 12:30pm EST * Spanish yields sharply higher after disappointing bond sale * Weak euro zone retail sales data * ECB rate decision and U.S. jobs data ahead By Wanfeng Zhou NEW YORK, Dec 5 (Reuters) - The euro slipped from a seven-week high against the dollar on Wednesday after a disappointing Spanish bond auction and weak euro zone economic data prompted investors to book profits on recent gains. Optimism that Greece will receive more money from its international lenders had buoyed the euro over the past week, but the rally lost steam as worries about Spain resurfaced. Th e technical outlook also looked bearish after a break above $1.31. "My theory is that this is the last week of an equity market rally, and therefore the last week of a euro/dollar rally," said Andrew Busch, senior currency strategist at BMO Capital in Chicago. Busch noted that the euro/dollar reached a new high on Wednesday at $1.3125 and then traded lower. He said if it closed below Tuesday's close of around $1.3094 "then we have an 'outside reversal' technical pattern and should point to lower euro/dollar on a short term basis." Spain auctioned fewer bonds than it hoped to, sending yields sharply higher and reviving talk of an official bailout request from Europe's fourth-largest economy. A sharp fall in euro zone retail sales for October dented hopes of a consumer-led recovery from recession, which also pressured the euro. The euro fell 0.2 percent to $1.3074, retreating from a session peak of $1.3126 on Reuters data, the highest since Oct. 18. It was the first fall in the euro against the dollar in six trading sessions. Further chart resistance is located at the October high around $1.3140 and the September high around $1.3170. Against the yen, the euro rose 0.4 percent to 107.67 , having risen as high as 107.95 on Reuters data, a 7-1/2 month high. It also hit a 2-1/2 month high against the Swiss franc, extending recent gains after Switzerland's largest banks said they would charge for some franc deposits. The dollar rose 0.6 percent to 82.39 yen. Investors have been expecting a more dovish stance from the Bank of Japan if the main opposition party wins a Dec. 16 election as seems likely. ECB, U.S. JOBS DATA AHEAD Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said she expects a broader range of $1.26 to $1.32 in the euro in the near term. "There is still too much uncertainty to drive euro back to its year-to-date highs (near) $1.35; accordingly we would expect the current rally to top out." The European Central Bank meets on Thursday and is expected to keep rates on hold but the bleak outlook for the euro zone has kept expectations of further easing alive. On Friday, the U.S. Labor Department releases its closely-watched nonfarm payrolls data for November. U.S. private-sector employers added 118,000 jobs in November, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 125,000 jobs. A separate report showed the pace of growth in the U.S. services sector increased more than expected in November. The data had a limited impact on currencies. Some strategists said the euro could also weaken if signs intensify that U.S. policymakers are struggling to avert the so-called fiscal cliff, fuelling worries the global economy could suffer, and lifting demand for the safe-haven dollar. The fiscal cliff is a combination of tax hikes and spending cuts due to kick in early next year that could tip the world's biggest economy into recession. "Nothing is going on" in the talks, U.S. House Majority Leader Eric Cantor told reporters following a meeting with fellow Republicans. "We ask the president to sit down with us." Link this Share this Digg this Email Reprints

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