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EUR/USD Supported By Sovereign Demand But Gains Limited
Written by article default Wednesday, 19 January 2011 15:25
The euro remained up against the U.S. dollar on Wednesday, supported by reported Asian sovereign buying but gains were limited as it failed to make a sustained break above a key resistance level at 1.35.EUR/USD hit 1.3505 during European early afternoon trade, the pair’s highest since November 23; the pair subsequently consolidated at 1.3484, surging 0.73%.
The pair was likely to find support at 1.3252, Tuesday’s low and short-term resistance at 1.3505, the days high.
Tuesday’s decision by European Union leaders to postpone a decision on expanding the euro zone bailout fund until their next meeting on February 4 weighed on the single currency.
A report in a German newspaper that the Berlin government was considering a Greek debt restructuring plan allowing Greece to buy back its own debt using a euro zone crisis fund also weighed. Athens and Berlin both denied the report.
But the euro stayed well supported after comments from European Central Bank head Jean-Claude Trichet last week on near-term inflation pressures fuelled expectations of an earlier-than-forecast rate rise and after a strong German ZEW sentiment survey.
The euro was also higher against the pound, with EUR/GBP rising 0.37% to hit 0.8418.
Later in the day, the U.S. was expected to publish official data on building permits as well as a report on housing starts.