Euro off lows in thin trade; Aussie eyes data
SYDNEY (Reuters) - High-beta currencies like the Australian dollar got off to a firm start in Asia on Wednesday, having outperformed their G3 counterparts as markets geared up for more policy action from major central banks.
But among the three most liquid currencies in the world, the euro managed to fare the best. It was last at $1.2603, up from Tuesday's low of $1.2559. Immediate resistance is seen at $1.2693, a high reached on Friday after European leaders hammered out a deal to tackle the region's debt crisis.
Against the yen, the single currency drifted up to 100.63, putting some distance from Tuesday's low of 99.89.
But the euro fell to a fresh 4-1/2 month low against the Australian dollar at A$1.2235. The Aussie also reached two-month highs on the greenback and yen near $1.0300 and 82.18.
Technically, traders said the close above its 100-DMA at $1.0261 has paved the way for the Aussie to test $1.0370, a level representing the 61.8 percent retracement of this year's major $1.0857-$0.9581 drop.
A string of weak data out of the United States and Europe has spurred expectations of more stimulus from both the European Central Bank and Federal Reserve. This has encouraged the market to use the euro and U.S. dollar as funding currencies for carry trades, dealers said.
The ECB is due to hold its policy meeting on Thursday and is expected to cut interest rates to a record low.
Traders expect the euro to consolidate between $1.2560/1.2660 in the lead up to the ECB meeting.
"The EUR/USD's consolidation and failure to set fresh highs in the wake of the euro zone Summit play into the budding Symmetrical Triangle on the daily chart," said Christopher Vecchio, Currency Analyst at DailyFX.
"For now, we are looking for a pullback towards $1.2480 before the direction of the triangle is determined."
Trading was lighter than usual overnight and likely to remain so on Wednesday with the United States closed for a public holiday.
"Historically, when we've seen major holidays occur in the middle part of the week, liquidity tends to be thinner for the majority of the week on the whole and we expect the US holiday on Wednesday to give way to the same trading conditions," Vecchio added.
Ahead of the central bank event on Thursday and U.S. jobs data on Friday, markets will take their cue from Australian retail sales data due at 0130 GMT as well as HSBC's report on China's services sector at 0230 GMT.
Any upside surprises in the data could give risk sentiment a bit of a boost. Conversely, weaker-than-expected numbers would turn investors cautious.
(Additional reporting by Reuters FX analyst Rick Lloyd; Editing by Wayne Cole)
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