SYDNEY (Reuters) - The dollar was broadly steady against its major counterparts in Asia on Monday and near enough to some long-lasting support levels that the decline of the past few weeks suggests a rebound is probably on the cards.
There was an early wobble against the yen which saw the dollar quoted as low as 98.17 at one stage, but it quickly recovered to 98.72.
It was also steady on the euro at $1.3381, almost exactly where it stood late Friday in New York. There are layers of chart resistance from $1.3400 up to last week’s peak at $1.3452, while support lies between $1.3335 and $1.3370.
The euro has been steadily gaining ground on the dollar for over seven weeks but is now nearing the top of a trading range that has lasted since late 2011, and will be tough to crack.
Much the same was true for sterling and the Swiss franc, suggesting the dollar could be in for a bounce.
“Importantly, last week’s price action suggests the upside risks are on the rise given the effective test and hold of key support levels amid a short term oversold framework,” argued analysts at JPMorgan.
“Moreover, several USD pairs as well as the DXY confirmed bullish reversal weeks.”
The dollar index .DXY was a shade firmer at 81.379 on Monday but it would take a break above the August highs from 81.943 to 82.500 to get a clear uptrend going.
Helping the dollar is that the market is not as long of the currency after several weeks of falls.
Speculators pared their bets in favor of the U.S. dollar for a fifth consecutive week in the week ended August 20, data from the Commodity Futures Trading Commission showed on Friday.
The value of the dollar’s net long position fell to $13.54 billion, the smallest in two months, from $17.62 billion the previous week. Speculators were bullish on the euro for a third straight week. <IMM/FX>
Fundamentally, the dollar was still smarting from Friday’s U.S. data showing sales of new U.S. homes slid 13.4 percent in July to their lowest in nine months, sparking worries that rising mortgage rates were curbing the recovery.
But analysts emphasized that this sales series is notoriously erratic and subject to large revisions, so it was far too early to draw any solid conclusions for it.
“Of course, new housing is a volatile series and we just got news that existing home sales continued to rise sharply,” said Citi economist Peter Dantonio.
“But this is a huge decline in new home sales that comes at a time when mortgage rates are shooting higher. So the drop raises some red flags about the strength of the housing recovery going forward.”
The news added to uncertainty about when the Federal Reserve might start tempering its stimulus and pulled 10-year Treasury yields back 10 basis points to 2.82 percent.
Much of the market still thinks the Fed will begin tapering in September, but a lot will depend on the August payrolls report due on September 6. Analysts suspect it would take a very weak reading to push back the start date.
In Asia, attention would also be on the Indian rupee and Indonesian rupiah which showed tentative signs of steadying last Friday after several days of heavy selling.
Reporting by Wayne Cole; Editing by Shri Navaratnam