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EUR/USD Loses Ground, Remains near 8-Month Low

H.S. Borji
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EUR/USD Loses Ground, Remains near 8-Month Low

The euro declined against its US counterpart Friday, as divergent economic data in the Eurozone and United States kept demand for the greenback elevated in late-week trade.

The EURUSD declined 0.25 percent to 1.3430, its lowest level since November 2013. The pair faces initial support below the 10-day moving average (1.3518). On the upside, initial resistance is likely found at 1.3487.

The EURUSD is trading more than 280 pips below its 100-day moving average and is pacing for a weekly loss of 0.75 percent. The pair fell below the 1.35 handle Tuesday amid steady US consumer inflation data and strong existing home sales figures.

Market analysts contend the pair’s recent skid is probably a technical one, as there hasn’t been a single underlying trigger for the euro’s decline. At the same time, traders could be expecting further monetary easing at the hands of the European Central Bank, which only last month cut its benchmark lending rate to 0.15 percent and introduced a negative deposit facility interest rate.

In economic data, German business confidence declined for a third consecutive month, as geopolitical tensions in the Ukraine and Middle East weighed on the current business climate.

The business climate index declined from 109.7 to 108 in July, the Munich-based Ifo Institute reported today. Economists forecast a narrower decline to 109.4.

The gauge of the current situation fell from 114.8 to 112.9, while barometer of future expectations dipped from 104.8 to 103.4.

The business climate index declined across all major industrial groups, including manufacturing, wholesaling and construction.

Separately, German consumer confidence unexpectedly rose, as income expectations reached their highest level since Germany’s reunification.

The consumer confidence index increased from 8.9 to 9, GfK reported today. Economic expectations were virtually unchanged, remaining close to the previous month’s three-year high.

On Thursday Markit Group reported more favourable conditions in the Eurozone manufacturing sector, and said the region’s economy expanded at a more robust pace this month. Markit’s composite gauge of Eurozone business activity increased from 52.8 to 54. Economists forecast no change from the previous month.

Gains were led by Germany, which posted a sharp acceleration in both manufacturing and services. Germany’s gauge of manufacturing advanced 0.9 percentage points to 52.9. The gauge of service activity increased 2 percentage points to 56.6.

The euro has a relatively light schedule in the early part of next week. The calendar heats up next Wednesday with the release of Eurozone consumer and industrial confidence. Germany will also post July inflation data.

The European Commission will report on Eurozone consumer prices on Thursday.

In other trading, the euro declined further against the British pound, as the EURGBP tumbled 0.15 percent to 0.7914. The pair is on pace to break even this week as disappointing UK data kept the pound bulls at bay. The pair faces initial support at 0.7885 and resistance at 0.7971.

The euro declined against the Japanese yen, as the EURJPY fell 0.24 percent to 1.3674. The pair faces initial support at 1.3656 and resistance at 1.3741.

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