-- Euro edges higher as services-sector, retail sale data comes in better than expected
-- But ECB meeting, unresolved Spanish and Greek issues still loom large
-- Australian dollar weakens as trade deficit widens
By Alexandra Fletcher
The Australian dollar extended its slide against the euro and dollar in European dealing hours Wednesday after poor Australia trade data, while the euro strengthened back above $1.29 against the dollar as currency traders shrugged off more signs of European recession and looked ahead to the week's key central bank policy meetings.
The euro traded to as high as $1.2937, having fallen to as low as $1.2877 at the start of European trading session, following the purchasing managers index data that showed the euro-zone's services sector contracting again in September. But the 46.1 figure was slightly better than expected and was followed by data showing a fourth-straight monthly improvement in euro-zone retail sales.
Overall, trading was a little subdued and analysts speculated whether the euro's move higher could be sustained ahead of the European Central Bank's policy meeting Thursday and Friday's closely watched monthly U.S. employment report.
Despite Spanish Prime Minister Mariano Rajoy's assertion Wednesday that his country wouldn't be asking for financial assistance anytime soon, investors also continued to mull the timing of a request.
"Speculation has focussed on a bailout request this weekend, just ahead of the October 8 Eurogroup meeting [of euro-zone finance ministers]. In our book it's a fair bet and, if it not this weekend, we suspect it will not be long afterwards," said Steven Barrow, head of G10 currency research at Standard Bank in London.
Analysts also pointed to the unresolved Greek question, given investor concerns that another bout of Greek debt restructuring might soon be needed.
"This is being largely overlooked by markets but could emerge as a worry during Draghi's press conference and in the runup to next week's Eurogroup meeting," said Valentin Marinov, currency strategist at Citigroup.
Meanwhile, the Australian dollar traded at its lowest level against the euro since June 14 at AUD1.2667 and briefly fell below $1.02 after August data showed the Australia trade deficit blew out to its widest level in more than four years.
Elsewhere, the market expects the National Bank of Poland will cut rates for the first time since 2009 at its policy meeting later Wednesday in an effort to support the economy that is no longer immune to the euro zone's debt crisis. The central bank's rate council is widely expected by market analysts to reverse its May rate hike and slash the current 4.75% interest rate by 25 basis points.
Looking ahead, U.S. September ADP employment number, regarded widely as a precursor to non-farm payrolls, is due at 1215 GMT.
At 1000 GMT, the euro was trading at $1.2918 against the dollar, compared with $1.2920 late Tuesday in New York, according to trading system EBS. The dollar was at Y78.23 against the yen, compared with Y78.16, while the euro was at Y101.08 compared with Y100.99. Meanwhile, the pound was trading at $1.6118 against the dollar, compared with $1.6235 late Tuesday in New York.
The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 69.800 from about 69.740.
A summary of key levels for chart-watching technical strategists is below:
Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF
Spot 1032 GMT 1.2919 78.23 1.6118 0.9367
3 Day Trend Range Bullish Bearish Range
Weekly Trend Bearish Range Bullish Bullish
200 day ma 1.2854 79.09 1.5829 0.9406
3rd Resistance 1.3000 78.66 1.6215 0.9438
2nd Resistance 1.2968 78.48 1.6186 0.9418
1st Resistance 1.2937 78.31 1.6142 0.9398
Pivot* 1.2923 78.12 1.6149 0.9362
1st Support 1.2877 78.17 1.6086 0.9341
2nd Support 1.2850 78.11 1.6025 0.9332
3rd Support 1.2803 77.97 1.6000 0.9295
Forex spot: EUR/AUD
Spot 1032 GMT 1.2640
3 Day Trend Bullish
Weekly Trend Bullish
200 day ma 1.2471
3rd Resistance 1.2879
2nd Resistance 1.2700
1st Resistance 1.2667
Pivot* 1.2538
1st Support 1.2629
2nd Support 1.2613
3rd Support 1.2545
(Dow Jones Technical Strategist Francis Bray contributed to this story.)
Write to Alexandra Fletcher at alexandra.fletcher@dowjones.com
