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Forex - EUR/USD gives up gains, pulls back from 2-day high

Published 09/06/2011, 07:16 AM
Updated 09/06/2011, 07:16 AM

Investing.com – The euro trimmed gains against the U.S. dollar on Tuesday, giving up some of the gains made after the Swiss National Bank pegged the franc to the euro earlier, sending the single currency sharply higher across the board.

EUR/USD pulled back from 1.4245, the pair’s highest since Friday, to hit 1.4171 during European early afternoon trade, still up 0.52% over the day.

The pair was likely to find support at 1.4037, the days low and resistance at 1.4245, the days high.

The euro posted sharp gains against its major counterparts after the SNB announced that it had set a minimum exchange rate target of 1.20 per euro for the Swiss franc.

The SNB said the massive overvaluation of the currency posed an acute threat to the Swiss economy and carried a risk of deflation. The central bank also said it was prepared to defend the rate with the “utmost determination” by purchasing foreign currency in “unlimited quantities.”

The euro had slumped to a two-month low against the greenback earlier, as fears that the sovereign debt crisis in the single currency bloc is deepening weighed.

Investor concern focused on Italy, as ongoing uncertainty over the implementation of a government austerity package saw the country’s borrowing costs surge.

Meanwhile, official data showed earlier that German factory orders fell significantly more-than-expected in July, dropping for the first time in four months on the back of a decline in export demand.

The euro was also higher against the pound, with EUR/GBP rising 0.69% to hit 0.8806.

Later Tuesday, finance ministers from Germany, the Netherlands and Finland were to meet to discuss the issue of collateral for loans to Greece, while the Institute of Supply Management was to produce a report on U.S. service sector activity.

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