TOKYO, July 27 (Reuters) – The euro ticked up towards a two-month peak above $1.3000 on Tuesday, although traders were cautious about bidding it up too much as they await clarity on Deutsche Bank’s exposure to euro zone sovereign debt.
Deutsche (DBKGn.DE) posted second-quarter pretax profit in line with expectations but it has not revealed its exposure to European sovereign debt following tests to see how well banks in the region would stand up to financial shocks. [ID:nLDE66Q07V] [ID:nLDE66P1X4]
Some traders said that if the bank gives details and there are no shocks, that could help build more confidence in euro zone banks and trigger buying in the euro.
In that case, the single currency’s next target would be last week’s two-month high of $1.3029 EUR= and then $1.3125, a 38.2 percent retracement of its December-June fall, technical analysts said.
“Despite all the negative talk about the stress test results, German interest rates are rising and the euro firmed, which seems to suggest lingering euro short-covering needs,” said Osamu Takashima, chief FX strategist at Citibank in Tokyo.
The euro rallied on Monday on relief the tests were over, although concerns they were not rigorous enough mean investors are still hesitant to make big bets on it, while some traders say euro zone debt redemptions this week could also constrain it.
Citi estimates there are some 45 billion euros worth of maturing bonds and coupon payments this week. [ID:nLDE66M1PR]
The euro rose 0.1 percent to $1.3009 EUR=. It climbed as high as $1.3019 earlier. Any fall was seen likely to be limited while it remained above support at $1.2870 — its 100-day moving average — and last week’s low around $1.2730.
The euro gained 0.2 percent to 113.11 yen EURJPY=. It has met stiff resistance at 113.30-50 in the past two weeks, partly on selling by Japanese exporters.
But Takashima said it was likely to rise above 113 yen.
“It’s true Japanese exporters were lowering their target price to around 113 yen from 118 yen. But looking at trade data, exports to Europe are stagnating, which points to limited selling by exporters,” he said.
The Aussie was steady on the day at $0.9021 AUD=D4, after rising 0.9 percent on Monday as investor risk appetite revived after the stress test results.
Chartwise it could be set to rise against the yen. On the daily Ichimoku chart for Aussie/yen, the tenkan sen has risen above the kijun sen line, in a bullish signal.
The top of the Ichimoku cloud now lies roughly around 80 yen, and a rise above that level would be another bullish sign.
“I think investors will tiptoe back into high-yielders as worries about Europe will gradually subside,” said a trader at a Japanese brokerage house.
The U.S. dollar gained 0.1 percent against the yen to 86.97 yen JPY=, though it was capped by offers around 87 yen from Japanese exporters. (Additional reporting by Reuters FX Analyst Krishna Kumar in Sydney; Editing by Joseph Radford)