* Dollar falls versus yen
* Euro breaks through 55-day simple moving avg at $1.2677
* Australian dollar bounces but downside risks remain
(Updates prices, adds comment)
By Nick Olivari
NEW YORK, Aug 23 (Reuters) - The euro slipped on Monday, as
new euro zone data added to concerns over the economy and
investors increasingly bet on prospects of loose monetary
policy until year-end.
Sentiment has begun to turn sour on the single currency,
after a rally in late July and early August, as investor focus
has shifted back to the euro zone and away from the U.S.
economy.
Euro support dwindled further on Friday after European
Central Bank Governing Council member Axel Weber said the ECB
should extend its loose monetary stance.
Adding to the negative sentiment, a survey of euro zone
purchasing managers on Monday showed slower manufacturing
growth in the region in August. []
"August's deceleration in activity has dented some of the
euro bulls' arguments about economic outperformance vis-a-vis
the United States and as such put a cap on any euro rally for
now," said Boris Schlossberg, director for currency research at
GFT in New York.
The euro "continues to be hobbled by concerns over the
economic health of the periphery members, and today's mildly
weaker-than-expected results from core Europe have not helped
to assuage those worries," he said.
In mid afternoon trading in New York, the euro was down 0.7
percent against the yen at 108.03 yen <EURJPY=> after falling
to its lowest in nearly eight weeks.
Against the dollar, the single currency was 0.3 percent
lower at $1.2672 <EUR=>. The euro fell as low as $1.2647 after
breaking through below its 55-day simple moving average at
$1.2677, according to Reuters data.
In another technical move, a sell signal on the euro
against the dollar was triggered on Monday when the 12- and
26-day moving average convergence divergence indicator moved
into negative territory for the the first time since July 2.
The MACD, which is used as an indicator of short-term
momentum, was last at -0.0017.
Technical analysts said the next support level is $1.2605,
a 50 percent retracement of the euro's rise from a four-year
low of $1.1876 in June to its August peak of $1.3334.
Figures compiled by the Commodity Futures Trading
Commission showed currency speculators extended euro short
positions in the week ended Aug. 17. For details, see:
[].
Data from UBS AG also showed a drop in net investment flows
into the euro zone for a third consecutive week.
NO SIGNAL FROM JAPAN
The dollar was down 0.4 percent against the yen, at 85.30
yen <JPY=>, close to a 15-year low of 84.72 yen hit earlier
this month.
Markets were disappointed that a much-hyped meeting between
Japanese Prime Minister Naoto Kan and Bank of Japan Governor
Masaaki Shirakawa failed to live up to expectations.
Both agreed to work closely but offered few clues on
whether further monetary easing was possible. []
"The meeting did not have much to offer, including no
mention about being more active in the currency market," said
Tom Levinson, FX strategist at ING. "Dollar/yen is headed
toward the 85 yen level and for the euro toward support that
comes in just above 107 yen."
The Australian dollar fell after being dented by political
uncertainty from an inconclusive general election.
The currency fell earlier after neither major party in
Australia won an overall majority in Saturday's election.
[]
The Aussie traded as low as $0.8833 <AUD=D4> but recouped
losses to trade at $0.8929, helped by buying from real-money
accounts. On electronic trading platform EBS it fell to
$0.8835.
"If the incumbent party appears as though they will stay in
power, look for the aussie to lose momentum," said Jessica
Hoversen, fixed income and currency analyst at MF Global in
Chicago. A "Labor win means that the mining tax will remain
intact at 30 percent."
The incumbent Australian Labor Party plans a tax on mining
profits, which investors fear would make foreign and domestic
investment less attractive, reducing the demand for the
Australian currency. The opposition Liberal Party would scrap
the planned tax.
(Additional reporting by Vivianne Rodrigues and Neal
Armstrong; Editing by Leslie Adler)
