Forexpros – The euro trimmed gains against the U.S. dollar in holiday-thinned trade on Thursday, remaining close to an 11-month low amid speculation over an imminent French sovereign downgrade, while worries over the region’s ongoing debt crisis continued to weigh.
EUR/USD pulled back from a session high of 1.3119 during European morning trade to subsequently consolidate at 1.3058, easing up 0.07%.
The pair was likely to find support at 1.2956, the low of December 15 and resistance at 1.3131, the high of December 20.
Trading volumes were expected to remain light ahead of the Christmas holiday weekend, as many traders have closed books before the end of the year, reducing liquidity in the market and increasing the volatility as the threat of mass credit ratings downgrades for euro zone countries lingered.
Sentiment on the euro remained fragile as concerns persisted over the potential effects of the European Central Bank’s unprecedented EUR489.19 billion three-year loan operation on Wednesday, intended to avoid a credit crunch in the euro zone.
Markets were also hoping the move would help increase bond purchases of indebted euro zone countries. But the heavy demand from 523 European lenders underlined concerns over the scale of the financial crisis in the euro zone.
Meanwhile, investors were eyeing a joint press conference from ECB President Mario Draghi and Bank of England Governor Mervyn King in Frankfurt later in the day following a meeting of the European Systemic Risk Board.
Also Thursday, Italian Prime Minister Mario Monti was to hold a confidence vote on approving a much needed EUR33 billion emergency austerity package. The package passed in the lower house last week and was expected to pass without much resistance in the upper house.
Elsewhere, the euro was fractionally lower against the pound with EUR/GBP edging 0.02% lower to trade at 0.8322.
Later in the day, the U.S. was to publish its weekly report on initial jobless claims, as well as revised data on third quarter GDP, while the University of Michigan was to release revised data on consumer sentiment and inflation expectations.
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