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Forex - EUR/USD gains as dollar rally takes a breather

Published 09/23/2014, 12:09 PM
Updated 09/23/2014, 12:10 PM
Euro firms against dollar as investors sell greenback for profits

Euro firms against dollar as investors sell greenback for profits

Investing.com - The euro rose against the dollar on Tuesday despite soft European data as investors locked in gains from the greenback's recent rally and sold the U.S. currency for profits.

In U.S. trading, EUR/USD was up 0.04% at 1.2854, up from a session low of 1.2816 and off a high of 1.2901.

The pair was likely to find support at 1.2814, Monday's low, and resistance at 1.2994, last Tuesday's high.

The dollar firmed against the euro and most other major currencies in recent weeks as investors prep for monetary policy to become less accommodative in the U.S. at a time when Europe and Japan are taking steps to loosen policy.

By Tuesday, investors viewed the dollar's rally as due for a breather and sold the greenback for profits, giving the single currency room to rise amid mixed European data.

Research group Markit reported that the euro zone composite output index, which measures the combined output of both the manufacturing and service sectors slumped to a nine-month low of 52.3 from 52.5 in August.

The bloc’s services PMI slid to a three-month low of 52.8 from 53.1 last month, missing expectations for a 53.0 reading.

The manufacturing index ticked down to a 14-month low of 50.5 from 50.7 in August, though in line with market forecasts.

Germany’s private sector output continued to expand this month but growth in the manufacturing sector slowed to a 15 month low.

Private sector activity in France fell for the fifth consecutive month, as service-sector activity declined for the first time in three months, offsetting a slower decline in manufacturing output.

“The survey paints a picture of ongoing malaise in the euro zone economy,” Chris Williamson, chief economist at Markit said.

The data indicated that the euro area economy is on track to grow by 0.3% in the third quarter and signaled that growth could slow further in the fourth quarter.

On Monday, European Central Bank President Mario Draghi said economic activity in the euro area has slowed and added he saw risks for further downturn, though markets have already priced in monetary stimulus measures to shore up the economy.

Meanwhile in the U.S., Markit reported that its preliminary U.S. manufacturing purchasing managers’ index came in at 57.9 in September, unchanged from August and the highest since April 2010 though shy of market calls for a 58.0 reading

A separate report showed that the Federal Reserve Bank of Richmond’s monthly manufacturing index rose to 14 this month from 12 in August.

Elsewhere, the euro was up against the pound, with EUR/GBP up 0.07% at 0.7860, and up against the yen, with EUR/JPY up 0.08% at 139.96.

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