Forexpros – The euro turned lower against the U.S. dollar on Tuesday, after Standard & Poor’s placed the rating of the euro zone’s bailout fund on review pending a possible downgrade, one day after it threatened a mass downgrade of euro zone ratings.
EUR/USD pulled back from 1.3427, the daily high, to hit 1.3383 during U.S. morning trade, sliding 0.13%.
The pair was likely to find support at 1.3258, the low of November 30 and resistance at 1.3406, the day’s high.
S&P placed the triple A rated European Financial Stability Facility on negative watch and flagged a possible two notch downgrade, depending on its review.
The announcement came just a day after S&P put the long-term sovereign-debt ratings of 15 euro zone members, including the six European sovereigns that guarantee the EFSF’s financial obligations, on negative watch.
But the euro remained supported after German Chancellor Angela Merkel said European Union leaders will take important decisions to stabilize the euro zone at a summit later this week and brushed off S&P’s warning of a possible joint downgrade.
“What a rating agency does is the responsibility of the ratings agency,” Merkel said.
“We will take decisions on Thursday and Friday that we consider important and indispensable, and with that make a contribution to the stabilization of the euro zone,” she added, but warned that this would be a lengthy process.
On Monday, Merkel and French President Nicolas Sarkozy outlined proposed reforms to EU treaties to strictly enforce budget discipline and restore investor confidence in the single currency zone, which will be discussed at the summit.
The euro was fractionally higher against the pound, with EUR/GBP inching up 0.04% to hit 0.8567.
Also Tuesday, official data showed that German industrial orders for October posted their strongest rise since March 2010.
In a separate report, Eurostat said that the euro zone’s gross domestic product expanded in line with expectations in the third quarter, growing by 0.2%, unchanged from an initial estimate.
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