ForexLive US wrap-up: EUR hangs onto most of gains

• US weekly jobless claims fall 11,000 to 457,000
• IMF sees China growth at 10.5% this year; CNY undervalued, loan quality questioned
• KC Fed manufacturing index bucks trend, rises to 14 in July from 3 in June
• House committee to hold China FX hearings Sept 15
• Fed’s Bullard raises specter of Japanese-style deflation; more QE would be the RX
• Fed’s Fisher: Growth to be suboptimal; regulatory uncertainty outweighs further easing of monetary policy.
• S&P 500 closes  -0.4% to 1101
• US Treasuries close 1 bp lower at 2.98% in 10-year maturity

EUR/USD opened firm in the US, building on the rally in London this morning. Prices managed to overcome barrier options at 1.3100 but were only able to extend the range as high at 1.3107. Profit-taking ahead of the 38.2% retracement of the drop from 1.5145 helped cap gains as did a very bearish report on EUR/USD from a well-known US hedge fund, FX Concepts, suggesting Europe’s sovereign debt problems are far from over and a major top for the euro is seen some time over the next month.

A sharp reversal in the S&P, from a gain of 1% shortly after the open to a loss of 1% around around midday sparked some risk aversion but EUR/USD managed to hold the bulk of its gains, pulling back only as far as 1.3058. Bids are seen down to 1.3045 near-term while trailing stops start in the 1.3035/40 area. Topside stops reside in the 1.3145/50 area from leveraged players.

FX Concepts is also very bearish on AUD, helping take the steam out of a solid morning rally in that pair. Goldman estimated that as much as AUD 7 bln may have to be purchased for month-end at tomorrow’s fixings. Others see strong demand but not nearly approaching Goldman’s estimate.  0.8977/0.9025 was the NY range.

Solid demand is rumored for CAD tomorrow for month-end as well. 1.3010/1.3090 was the Toronto range.

USD/JPY and UR/JPY were lower with equities in NY trade. Talk of More QE from Fed’s Bullard sent the pair to its lows at 86.57 but it soon recovered to the 87.95/00 area before range-trading int he 86.80s into the close.JPY demand is less robust that that for the commodity currencies and GBP, we’re told.

Cable traded in choppy fashion today, making two attempts to establish its footing above its 50% retracement 1.7045/1.4032 drop at 1.5640 but failed. It closes at 1.5610, up from 1.5580 session lows, where solid demand was seen. Cable demand is seen as strong at tomorrow’s fixings as well, we hear.

CHF was back in focus for a time today, first on rumors that the SNB will hike rates in September as well as on vague rumors of SNB selling of EUR/CHF. The cross slumped from 1.3755 European highs to New York afternoon lows of 1.3580.

US GDP will be the economic focus tomorrow. Economists expect 2.5% growth on an annualized rate in Q2. Traders probably have a slower growth priced in at this point, closer to 2%.