FOREX-Euro targets $1.45 after jump on chances of Greece deal

Tue May 31, 2011 1:27am EDT

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* Kiwi shines, hits fresh post-float high

By Hideyuki Sano

TOKYO, May 31 (Reuters) - The euro rose to a three-week peak against the dollar on Tuesday after a wave of short-covering triggered by a report saying Germany could make concessions on efforts to put together a bailout for Greece, with traders eyeing $1.45 as its next target.

Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece, the Wall Street Journal reported, citing people familiar with the matter. [ID:nL3E7GU21K]

"The euro zone problems appear to be subsiding for now. Or putting it another way, the market appears to have stopped looking at them as a factor for now," said Teppei Ino, a currency analyst at Bank of Tokyo-Mitsubishi UFJ, adding that the market could now focus on the heavy schedule for U.S. data releases this week.

The euro rose as high as $1.4407 EUR=, its highest in three weeks, piercing its 55-day moving average of $1.4334 and also $1.4373, the top of the Ichimoku cloud on the daily chart.

"The euro has gone through all the stop-loss levels I heard about this morning. It is very strong on the charts, and it's bouncing back now having hit a double-bottom of $1.4048 on May 16 and $1.3968 on May 2

3," said a trader at a Japanese bank.

"It also breached resistance at the top of the Ichimoku cloud, and the nearest resistance is seen at $1.45," said the trader adding that the level has become crucial after the euro moved around it in mid-April.

The European Union is racing to draft a second bailout package for Greece to release vital loans next month and avert the risk of it defaulting, EU officials said on Monday. [ID:nLDE74T0LG]

Jean-Claude Juncker, the chairman of euro zone finance ministers, said he was optimistic after discussing further aid for Athens with French President Nicolas Sarkozy in Paris.

Moves to plug a looming funding gap for 2012 and 2013 accelerated after the International Monetary Fund said last week it will withhold the next tranche of aid due on June 29 unless the EU guarantees to meet Athens' funding needs for next year.

DOLLAR DIPS

The dollar's index against a basket of currencies fell to its lowest level in three weeks, losing 0.5 percent to 74.568 .DXY =USD, having broken below support on the Ichimoku cloud bottom at 74.89.

The dollar has been hurt by a recent batch of disappointing U.S. data, with many traders thinking that important numbers this week, such as ISM manufacturing and payroll data, could cement the view that the U.S. recovery may remain slow for now.

"The dollar came under pressure ahead of U.S. jobs data and manufacturing figures due this week. Macro funds are offloading positions in the dollar as they expect slightly weaker figures after a bout of weak data earlier this month," said Koji Fukaya, chief currency analyst at Credit Suisse in Tokyo.

The dollar also fell 0.2 percent against the Swiss franc to 0.85 franc CHF=, a stone's throw from a record low of 0.8457 hit on Monday while the pound rose 0.4 percent to $1.6543 GBP=D4, its highest in four weeks.

The Australian dollar also gained 0.23 percent to $1.0713 AUD=D4, quickly recovering from small losses posted after weaker-than-expected Australian export data.

The New Zealand dollar did even better, jumping 1.0 percent to as high as $0.8264 NZD=D4, a fresh post-float high [ID:nL3E7GU1YW].

The yen failed to benefit from overall dollar weakness, slipping after Moody's said it had placed its rating on Japan under review for possible downgrade, less than a week after rival rating firm Fitch cut its outlook on Japan's debt.

The dollar gained 0.36 percent to 81.23 yen JPY= while the euro jumped more than 1.3 percent to 116.88 yen, its highest since May 20.

The euro moved from near its support at its 100-day moving average at 115.32 yen to 116.77 yen, zeroing in on immediate resistance at its 55-day moving average at 117.43 yen. The yen also dropped 0.8 percent against sterling GBPJPY=R. (Additional reporting by Antoni Slodkowski and Masayuki Kitano; Editing by Joseph Radford)

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