Forexpros – The euro extended gains against the U.S. dollar on Tuesday, as the suggestion of a euro zone debt redemption fund lifted market sentiment but investors remained cautious over European and U.S. financial issues.
EUR/USD hit 1.3568 during early European afternoon trade, the pair’s highest since November 18; the pair subsequently consolidated at 1.3550, climbing 0.46%.
The pair was likely to find support at 1.3421, the low of November 17 and resistance at 1.3640, the high of November 15.
Market sentiment strengthened after European Union economic affairs Chief Olli Rehn said that a proposal from the German government for a euro zone debt redemption fund was worth further scrutiny.
But the single currency remained under pressure after Spain’s Treasury sold EUR2.98 billion in three and six-month bonds in an auction which saw yields rise to 5.2% for the six-month bills, from 3.3% at a similar auction in October.
It was the first Spanish debt auction since the conservative party’s sweeping election victory on Sunday, but investors have remained jittery as plans on how to cut the deficit and restore market confidence have remained unclear.
In the U.S., fears over immediate U.S. credit downgrades eased after ratings agency Fitch said that the failure of a U.S. congressional committee to agree on a package of measures to slash the country’s deficit was likely to lead to a revision of the U.S. rating outlook to “negative”, rather than a downgrade.
Elsewhere, the euro was also sharply higher against the pound with EUR/GBP rising 0.33%, to trade at 0.8653.
Later in the day, the U.S. was to release preliminary data on gross domestic product, and the U.S. Federal Reserve was to publish the minutes of its November policy meeting, later Tuesday.
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