January 7, 2014 / 3:21 AM / 4 years ago

FOREX-Dollar firmer vs yen but gains limited after disappointing U.S. data

* Dollar clings above 2-week low vs yen set previous day

* U.S. dollar stays below one-month high vs euro

* Market still thin ahead of key event risks this week

By Masayuki Kitano and Ian Chua

SINGAPORE/SYDNEY, Jan 7 (Reuters) - The dollar edged higher versus the yen on Tuesday but was still struggling to recoup its losses from the previous day, when investors took aim at the greenback in the wake of disappointing U.S. data.

Trading is usually lacklustre in the first full trading week of the year as investors trickle back to their desks, with position adjustments dominating trade. That has given some support to the yen, the worst performing major currency in 2013 due to Japan’s ultra-loose monetary policy.

Traders are also reluctant to make aggressive moves ahead of major risk events later in the week including closely watched U.S. jobs data and policy meetings at the European Central Bank and Bank of England.

The dollar edged up 0.1 percent to about 104.33 yen, after having fallen 0.6 percent on Monday. The dollar fell as far as 103.91 yen on Monday, a low not seen since Dec. 23. It has pulled back from a five-year peak of 105.45 set last week.

“I think we will trade 103.50 yen to 105.00 yen this week. There are still stops under 103.80 yen that I think will get taken out once the buying ahead is cleared,” said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, referring to a possible trading range for dollar/yen ahead of the U.S. jobs data on Friday.

On the daily Ichimoku chart, a popular technical analysis tool, the dollar has support at about 103.53 yen, which is where the so-called kijun line comes in.

The kijun line can act as either support or resistance, depending on its location.

“I think most people regard the recent moves including those in equities as just a corrective phase,” said Teppei Ino, a Singapore-based analyst for Bank of Tokyo-Mitsubishi UFJ.

“For now, there are a number of (dollar/yen) support levels on technical charts,” he added.

While equities have retreated and U.S. Treasury yields have slipped back from their recent peak at the start of the new year, it is hard to tell how significant such moves are, Ino said. A clearer picture of how market players are planning to move in 2014 may start to emerge after the release of the U.S. jobs data on Friday, he added.

The euro inched up 0.1 percent to about 142.19 yen , having retreated from a five-year high of 145.675 set late last month.

Against the dollar, the euro held steady at $1.3628, having pulled away from Monday’s one-month low of $1.3572 after two measures of activity in the U.S. services sector showed slower growth in December.

Traders said the reports gave some investors an added excuse to take profits on long dollar positions, following the footsteps of currency speculators who had already done so in the week ended Dec. 31.

Analysts at BNP Paribas said the reports were not weak enough to call into question the Federal Reserve’s plans to continue tapering its asset purchases.

“We expect to see good interest to buy USD on dips heading into the jobs release, and remain short EUR/USD as a trade recommendation,” they wrote in a report to clients.

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