Forexpros – bsp; Forexpros – The euro dropped to 16 month lows versus the U.S. dollar due to France downgrade worries and German economic contraction.
EUR/USD hit a low of 1.2662 during U.S. trade.
The pair is off a high of 1.2790 and is currently trading at 1.2687 down 0.71%.
EUR/USD was likely to find support at 1.2587, the August 2010 low and technical resistance exists at 1.2790, the sessions high point.
The single currency plunged after Fitch Ratings stated that the European Central Bank needed to up their efforts to prevent the economic collapse of the euro zone.
Fears of a French credit downgrade persisted,weighing on the euro, despite a denial by French Finance Minister Francois Baroin that he had not been notified of a pending credit rating cut.
The euro bearish sentiment was stroked by a report showing the German economy contracted by 0.25% in the fourth quarter from the third and numbers indicating that euro zone industrial production is forecasted to have shrunk for a third month in November.
The ECB is widely expected to keep interest rates steady at 1% during the policy meeting Thursday.
Kathy Lien of GFT Forex told Bloomberg, “The European data builds the case the Draghi can be a little more dovish tomorrow. I’m a big proponent of euro weakness, and I think its headed below USD1.25. Today’s move only cements the fact there’s good fundamental reasons why the euro is falling.”
The Euro traded higher against the pound with EUR/GBP adding 0.39% to 0.8284.
Investors are anxiously awaiting the ECB’s interest rate announcement and U.S. retail sales numbers, business inventories and the federal budget balance on Thursday.
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