(MENAFN– ecpulse)
The euro rose during European trades Monday, yet remained near six-week low after suffering its biggest drop in over a year last week as investors sold the single currency on mounting expectation that the European Central Bank (ECB) may loosen policy in the near term.
Euro edged higher Monday after data showed Euro zone manufacturing activity accelerated in October as new orders increased for the fourth month in a row. Final Manufacturing Purchasing Managers` Index (PMI) rose to 51.3 from September`s 51.1, in line with an earlier flash reading.
The euro trimmed its losses and rose to $1.35057, well below a two-year high of $1.3833 struck on Oct. 25. The EURUSD so far hit a high of 35123 and a low of 1.34429.
Technically, the pair is attempting to break above 1.3534 resistance levels, which if breached could complement the bullish rally, while if the pair broke below support level of 1.3442 the pair would complete its decline.
Against the yen, the euro eased rose to ¥133.277 yen, after having fallen as far as 132.60 on Friday, it’s lowest in three weeks.
The single currency had its biggest weekly decline last week since July 2012 as some economists predicted the ECB led by President Mario Draghi will cut interest rates to revive growth.
Traders said the euro is likely to stay under pressure before the ECB`s policy meeting on Thursday, after data last week showed a plunge in euro area inflation.
Pressure on the euro lifted the dollar to a six-week high versus a basket of major currencies. The dollar index USDIX rose to 80.99 in Asia, its highest level since September 18. It last stood at 80.68, from an opening of 80.80.
Recent strong data on U.S. factory output and jobless claims have increased speculations the central bank may start reducing its stimulus program soon. The Institute for Supply Management’s manufacturing index rose to 56.4 in October, the highest since April 2011 suggesting that the 16-day government shutdown in October had little or almost no effect on factory activity.
Meanwhile, speaking at a conference of business economists in Sydney, the Federal Reserve Bank of Dallas President Richard Fisher said the central bank should resume normal monetary policy as soon as possible.
Fisher added that he is concerned that corporate credit spreads have narrowed too much and added that he does not see the Fed`s balance sheet rising to $6 trillion or more.
Later in the day, the spotlight shifts back to the U.S. data, where the August and September editions of the Factory Orders data set are due. Orders are expected to have grown over both of the months in question after a slump in July, which may boost the U.S. Dollar as traders consider the possibility of a sooner-than-expected tapering of stimulus.
The Australian dollar edged higher on Monday, supported by stronger-than-expected retail sales while supported by upbeat Chinese data on Sunday showing China`s services sector expanding at its fastest pace in 13 months in October.
The AUDUSD pair reversed last week’s losses during Monday European trades to hover around 0.94918, up from an opening of 0.94556.
Pound rose Monday, reversing last week’s losses after the Confederation of British Industry said it had raise its growth forecast for 2013 to 1.4 per cent, from 1.2 per cent in August, and expected output to build steadily.
The GBPUSD is currently trading around $1.59606 after opening at 1.59237. The pair scored a session high of $1.59653 and low of $1.59027.
Cable was likely to find support at 1.5902, the session low and a two-week low, and a break below might send it to 1.5875 targeting 1.5680, and resistance at 1.6045, Friday’s high, followed by 1.6078
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