Euro slides but may see short-term bounce

Mon May 21, 2012 9:35am EDT
 
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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The euro weakened against the dollar on Monday, weighed down by concerns about Greece and Spain's debt problems, although key technical signals and overextended bearish positioning suggested a short-term bounce.

Speculators who had piled up a record amount of bets against the euro cut some of those positions, rising from last week's four-month low and giving the currency a respite from this month's relentless selling.

The euro has fallen in six of the last seven sessions, down nearly 4 percent so far this month.

"Euro/dollar made an important double bottom and the positioning is definitely getting stretched," said Brad Bechtel, managing director, at Faros Trading in Stamford, Connecticut.

"Many will not shake out too much on the positioning given deep imbedded gains, but it is a currency that likes its double tops and bottoms, so we could be in a for a good-sized bounce."

In early New York trading, the euro fell 0.4 percent at $1.2734, well above Friday's low of $1.2640. A break below the nearby 2012 low of $1.2624 would take the shared currency back down to levels not seen since August 2010.

Bechtel said offers on the euro are thick above $1.2880 and above $1.2950.

"I ... still think it (euro) is a sell on rallies, not just against the dollar but also the yen," said Jeremy Stretch, head of currency research at CIBC World Markets.   Continued...

 
An illustration picture shows Euro banknotes in Brussels November 28, 2011. REUTERS/Thierry Roge