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Euro nurses losses, eyes on US jobs data

euroSINGAPORE/SYDNEY: The euro steadied on Friday after a drubbing overnight on weak euro zone data, supported by talk that Asian sovereign players were buying the single currency to defend an option barrier.
Some traders said the euro may trend lower in coming days, given growing worries about the euro zone growth outlook and the possibility of the European Central Bank softening its hawkish stance at next week's policy meeting.
Data on Thursday showed manufacturing in the euro zone contracted for the first time in almost two years and a Spanish bond sale drew lukewarm demand.
Also boding ill for the euro is its drop below an upward trendline drawn through its mid-July low and troughs hit in early August. The trendline now comes in near $1.4295 and may serve as resistance.
"Any hint of an easing bias from the ECB would accelerate EUR breaking the bottom of the recent range of 1.41-1.45," analysts at BNP Paribas said.
The euro was little changed at $1.4257 by midday in Asia on Friday. On Thursday, it fell 0.8 percent and touched a three-week low around $1.4227 at one point.
Traders said option positions built up during the last couple of days suggest some players are positioning for a break to the downside, targeting $1.3850.
Possible support levels for the euro include the euro's Aug. 12 intraday low near $1.4150 and its Aug. 5 intraday low of $1.4055.
Lower down, the euro's 200-day moving average comes in near $1.4005, and an upward trendline drawn off lows hit in June 2010 and January 2011 lies roughly around $1.3930 or so.
The Australian dollar fell as US stock futures retreated after the New York Times reported that theagency that oversees US mortgage markets is preparing to file suit against "more than a dozen" big US banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble.
The Aussie dollar dipped 0.2 percent to $1.0704.
The market's focus is on US jobs data due later on Friday, the last nonfarm payrolls report before a Fed policy meeting later this month, at which many market participants are expecting some sort of additional easing.
Unemployment is a key determinant in whether the Fed takes additional action to support the economy.
Market players say expectations for the jobs data have been lowered after the employment gauge in a US manufacturing survey released on Thursday dipped to its lowest level since November 2009. A strong result could trigger a bigger reaction than a weak outcome, said Adarsh Sinha, Asia-Pacific G10 FX strategist at Bank of America Merrill Lynch in Hong Kong.
"I think expectations are probably pretty pessimistic going into payrolls," Sinha said. Economists polled by Reuters are expecting the payrolls data to show an increase of 75,000 jobs.
Sinha, however, said that the market may now be bracing for a smaller increase of about 40,000 jobs.
"If it's better than expected, then the market is going to price out expectations of further easing to some extent... I would expect that to be a dollar positive scenario," he said.
The dollar index, which measures the dollar's value against a basket of currencies, was little changed at 74.537 , hovering near a three-week high of 74.714 hit on Thursday.
The yen showed little reaction to news that new Japanese Prime Minister Yoshihiko Noda picked Jun Azumi, a former parliamentary affairs chief for the ruling Democratic Party, to become the new finance minister.

Copyright Reuters, 2011


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