SYDNEY, Aug 12 – The dollar was a touch firmer in Asia on Monday as the euro took a knock from more aid rumblings over Greece, while technical signals were flashing oversold after almost five weeks of losses for the U.S. currency.
Still, a run of mixed data from the United States combined with hints of recovery in Europe and stabilization in China mean the U.S. economy is not so far ahead of the pack that it justifies a higher dollar either.
That left the dollar index stuck at 81.135 .DXY, not far from last week’s seven-week trough at 80.868.
“A key focus is on the DXY as the decline approaches the important 80.50/88 support zone,” said analysts at JPMorgan. “This area includes the August ’11 uptrend line and June low.”
“Given the importance of these levels and the oversold and diverging momentum setup, some pause/retracement seems close.”
Dealers noted positioning in the market had also become more favorable to consolidation as speculators had pared their bets in favor of the dollar for a third straight week.
The value of the dollar’s net long position fell to $21.62 billion in the week ended August 6 from $24.45 billion.
The euro was hovering at $1.3335, compared to $1.3342 late in New York on Friday. It took a brief spill to $1.3313 early after Der Spiegel reported the Bundesbank was warning that Greece would need more financial assistance by early next year.
The single currency also faces tough resistance around $1.3400, which proved to be a major top back in June, and a break under $1.3250 could trigger a deeper retracement.
Against the yen, the dollar was stuck at 96.30, just a shade up from Friday’s late 96.22.
Japan releases data on gross domestic product and industrial output later Monday, with analysts looking for the economy to have expanded by 0.9 percent in the second quarter, from the previous quarter.
The report could be an important reference point for the government’s decision on whether to go ahead with an increase in the consumption tax. Japan watchers are hoping for growth to be more broad-based, with pick-ups in exports, capex and consumption.
The week ahead is also studded with important data from around the globe. The U.S. reports retail sales, consumer prices, housing starts, industrial production and surveys of regional manufacturing from the Federal Reserve.
Markets will be sensitive to any weakness in the numbers that could add to the uncertainty of when the Fed might begin tapering its asset buying.
The euro zone has its own numbers on GDP and inflation, while the UK reports unemployment and retail sales.
A raft of better data from China last week helped the Australian dollar rally from three-year lows to stand at $0.9186 on Monday, some way from the trough at $0.8846.
Many analysts, however, suspect the bounce had more to do with how short the market had been rather than an improvement in fundamentals for the Aussie.
“We see the recent movements in the AUD as part of a temporary squeeze,” said analysts at Australia and New Zealand Bank in a note. “We continue to envisage the AUD heading lower over the medium term and expect the opportunity to set positions for this decline will present in coming sessions.”
(Editing by Shri Navaratnam)
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