2012.05.28 13:30:07 WORLD FOREX: Spain Pressured, But Euro Calm In Holiday-Thinned Trade

-- Spain's core markets tumble as government bails out Bankia, but euro trades steady -- National holidays in Europe and the U.S. provide thin trading conditions By Alexandra Fletcher Of DOW JONES NEWSWIRES LONDON -(Dow Jones)- While concerns over the health of Spain's banking system weighed heavily on Spanish equities and bond yields, moves in major currencies were muted Monday, with only small losses in the euro in markets thinned by holidays across some of Europe and the U.S. Shares in Bankia S.A. (bkia.mc), Spain's fourth-largest bank, tumbled 27% when trading resumed Monday as investors digested the fallout from a EUR19 billion government bailout announced Friday. The gap in yields between Spanish and German 10-year bonds hit its widest level on record, reflecting a stronger urge among investors to hold German paper over the Spanish equivalent. Meanwhile, the cost of buying protection against a Spanish government bond default also matched its highest-ever closing rate. The euro, however, was given a modest boost against the dollar after news that Greece's pro-bailout New Democracy party has swung into first place ahead of next month's elections, according to opinion polls published on Sunday. The euro did give away some gains later in the session, but moves were muted. Strained areas of the euro-zone bond markets and main equity bourses were also quiet with the absence of major U.S. players due to the Memorial Day holiday. With major employment figures from the U.S. due on Friday, many investors are reluctant to forge any new direction. "From a macro perspective, the [currency] market is in a holding pattern now until Friday when non-farm payrolls are released," said Daragh Maher, foreign exchange strategist at HSBC Holdings PLC in London. "However, the market remains vulnerable to any shift in headline news and data," he added. The Australian dollar staged a small recovery against the dollar after tumbling by 10 U.S. cents against the dollar since mid-March. Some analysts said that a squeeze in short-term speculative positions had pushed the Australian dollar higher, as the slump in the Aussie to its lowest level since November 25 last week was too sharp and too rapid. "We doubt a sustained bounce in [the Australian dollar] will be forthcoming in the absence of improvement in the global macro backdrop, but with investors already loaded up [on negative bets], there may be less scope for selling to fuel additional declines," Todd Elmer, a currency strategist at Citigroup, wrote in a note to clients. The Indonesian rupiah traded close to a two-year low against the dollar after short-term hedge funds and overseas investors were spotted selling the currency at an alarming rate, prompting the Indonesian central bank to sell up to $200 million to prop up the rupiah. The Brazilian real perked up, pushing the dollar under BRL2.00 after the Brazilian central bank intervened in the market by $2 billion over the last two weeks to allow the real to appreciate. At 1039 GMT, the euro was trading at $1.2586 against the dollar, compared with $1.2516 late Friday in New York, according to trading system EBS. The dollar was at Y79.36 against the yen, compared with Y79.68, while the euro was at Y99.88, compared with Y99.68. Meanwhile, the pound was trading at $1.5702 against the dollar, compared with $1.5664 late Friday in New York. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 81.993 from about 82.396. A summary of key levels for chart-watching technical strategists is below: Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF Spot 1033 GMT 1.2581 79.36 1.5701 0.9555 3 Day Trend Bearish Range Bearish Bullish Weekly Trend Bearish Bearish Bearish Bullish 200 day ma 1.3299 79.71 1.5876 0.9130 3rd Resistance 1.2711 80.14 1.5848 0.9696 2nd Resistance 1.2688 79.82 1.5764 0.9612 1st Resistance 1.2627 79.73 1.5745 0.9582 Pivot* 1.2538 79.67 1.5665 0.9583 1st Support 1.2530 79.21 1.5677 0.9529 2nd Support 1.2495 79.00 1.5630 0.9485 3rd Support 1.2452 78.70 1.5599 0.9450 Forex spot: EUR/AUD Spot 1033 GMT 1.2740 3 Day Trend Bearish Weekly Trend Bearish 200 day ma 1.2908 3rd Resistance 1.2830 2nd Resistance 1.2800 1st Resistance 1.2769 Pivot* 1.2833 1st Support 1.2680 2nd Support 1.2646 3rd Support 1.2571 -By Alexandra Fletcher, Dow Jones Newswires, +44 (0) 20 7842 9462; alexandra.fletcher@dowjones.com; @djfxtrader (Laura Clarke and Dow Jones Technical Strategist Francis Bray in London contributed to this story.) (END) Dow Jones Newswires May 28, 2012 07:30 ET (11:30 GMT)