Forexpros – The euro dropped against the U.S. dollar on Tuesday, hitting 11 month lows. Word that German Chancellor Merkel opposes an increase in the latest European bail out fund and U.S. Fed Fund rate anticipation weighed on the euro.
EUR/USD hit a low of 1.3057 during mid session U.S. trade. The pair is down from a high of 1.3238 posted earlier, dropping 0.83%.
The pair was likely to find support at 1.3056 and technical resistance exists at 1.3097.
The euro fell sharply after Reuters reported that Angela Merkel opposes any increases to the 500 billion euro new bail out fund slated to be launched by mid 2012.
The U.S. Fed Fund rate announcement, occurring later in the session, added to investor’s nervousness.
Taking fire from the EUR/USD bears, U.S. retail sales climbed at the slowest pace in five months, dashing hopes of more aggressive U.S. economic growth.
Tommy Molloy, chief dealer at FX Solutions explained the situation to Bloomberg, “The reluctance to raise the ceiling of the permanent bailout fund is like taking candy from a baby. The very fact that there is any sort of reluctance to fix any problem as it arises suggests that the consensus that we thought was going to start with the EU summit last week really isn’t there.”
The Euro was also lower against the pound with EUR/GBP dropping 0.40% to hit 0.8428.
Investors are awaiting the U.S. Fed Fund rate announcement later in the trading session.
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