* Dollar gets support after drop in US consumer confidence
* Euro zone data appear to offer support to euro
(Updates prices, adds details, changes byline)
By Nick Olivari
NEW YORK, July 27 (Reuters) - The euro slipped against the
dollar on Tuesday, backing off an 11-week high as a drop in
U.S. consumer confidence to its lowest level since February
made investors more cautious and risk-averse.
The euro traded at its highest level since May against the
dollar early in the session but the single currency erased its
gains after the private confidence report for July as weaker
U.S. data tends to trigger risk aversion. For details, see
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"We have a little bit of a rally in the dollar after this
number because even though consumer confidence fell to a
five-month low, the euro is still struggling to sustain a drive
above 1.30, having tested that level on four separate occasions
this month," said Kathy Lien, director of currency research at
GFT Forex in New York.
In mid afternoon trading in New York, the euro was 0.2
percent lower at $1.2966 <EUR=> after touching $1.3045 earlier,
according to Reuters data.
Against the yen, the dollar rose more than 1 percent to
touch a session high at 87.94 yen <JPY=>. It last traded at
87.83 yen.
Still, analysts said sentiment on the European currency has
improved and Tuesday's data may not be weak enough to prevent
further gains in the euro and other higher-yielding currencies.
"The euro has given back some of its gains early in the
U.S. trading session but with optimism prevailing overall, our
bias remains for global currencies to edge higher this week,"
said Nick Bennenbroek, head of currency strategy at Wells Fargo
Bank in New York.
Declines in the euro were seen limited while it remained
above support at $1.2870 -- close to its 100-day moving average
-- and last week's low around $1.2730.
The recent run of better euro zone data continued on
Tuesday, with above-forecast euro zone money supply and German
consumer confidence figures. [] []
The fundamental outlook "seems to be deteriorating in the
U.S., while the state of affairs in the euro zone seems to be
looking up relative to very depressed expectations that had
persisted for much of 2010," said Sacha Tihanyi, a currency
strategist at Scotia Capital in Toronto.
NEXT TARGET
The next target for the euro, which has risen close to 10
percent since it fell below $1.20 last month, will be $1.3125,
the 38.2 percent retracement of its November-June fall,
technical analysts said.
"We are seeing more and more banks alter their forecasts
higher in euro/dollar either from research or from technical
teams," said Brad Bechtel, a managing director for trading at
Faros Trading LLC in Stamford, Connecticut.
"The 38.2 percent Fibonacci line comes in around 1.3125 on
the charts and is going to be the first line of resistance," he
said.
Still, other analysts, like Shaun Osborne at TD
Securities, said it may be too soon to assume the worst is over
for the single currency.
"Everyone seems to love the euro now. They've gone from
thinking the euro zone was going to fall apart to assuming
things are safe and sound," he said. "At best, (the gains)
appear to be short-covering rather than people going outright
long the euro."
The aussie rose to an 11-week high against the dollar
<AUD=> before surrendering those gains to trade down 0.1
percent though it remained above the 90 U.S. cent level for a
second day at US$0.9021. It closed above the 200-day simple
moving average on Monday.
(Reporting by Nick Olivari and Vivianne Rodrigues; Additional
reporting by Steven C. Johnson; Editing by Eric Walsh)
