FOREX-Euro pins hopes on ECB, Aussie eyes jobs data

Wed Sep 5, 2012 7:08pm EDT

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* Markets count down to ECB crisis-fighting measures

* Euro stays firm after powering higher

* Aussie dlr still on the defensive, jobs data in focus

By Ian Chua

SYDNEY, Sept 6 (Reuters) - The euro held firm in Asia on Thursday, having rallied sharply overnight on renewed hopes the European Central Bank will unveil a plan to help ease funding strains for stressed euro zone members.

The single currency powered to a high of $1.2625, from a low of $1.2502. It last stood at $1.2596, within easy reach of an eight-week peak around $1.2638 set on Aug. 31.

A break there could pave the way for a retest of $1.2765/75, a level representing the 50 percent retracement of its February to July drop.

The move came as a string of leaks from euro zone officials provided markets with more confidence that ECB President Mario Draghi will try to back up his pledge to do "whatever it takes" to save the euro. Details of the plan will be revealed after Thursday's policy meeting.

Sebastien Galy, a strategist at Societe General, said if the euro extended its rise towards $1.2765, he would then target a fall back towards $1.21.

"There are a lot of happy thoughts priced into the market and starting to build some long USD positions might well make sense for a tactical correction in global risk," he said.

The rally in the euro saw the dollar index retreat to 81.782, near a 3-1/2 month trough of 80.964 plumbed on Friday. Against the yen, the greenback was at 78.42, down a touch from Wednesday's high of 78.54.

The U.S. dollar, though, continued to gain ground against a broadly weaker Australian currency. The Aussie was at $1.0190 , having plumbed a near two-month low around $1.0167.

Since reaching a high of $1.0615 in early August, the Aussie has shed more than 4 U.S. cents as markets grew more bearish about China, Australia's most valuable export market.

Even the Reserve Bank of Australia (RBA) recently sounded less confident about the outlook for China, prompting the market to price in a bigger chance of a rate cut as soon as next month.

The Aussie could gain a bit of a reprieve this morning if a closely watched domestic jobs report due at 0130 GMT surprised on the upside. Conversely, any disappointment could see it quickly come under renewed pressure.

"A positive development should dampen speculation for additional monetary support, but the RBA may have little choice but to carry out its easing cycle over the medium-term as China faces an increased risk for a 'hard-landing'," said David Song, currency analyst at DailyFX.

Initial support for the Aussie is seen at the recent lows around $1.0167/70, then $1.0098/0100, the July trough and 50 percent retracement of the June to August rally.

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