Forexpros – The euro extended losses against the U.S. dollar on Monday, tumbling to a two-week low as uncertainty over whether Friday’s European Union agreement would be enough to contain the region’s debt crisis weighed.
EUR/USD hit 1.3253 during European afternoon trade, the pair’s lowest since November 24; the pair subsequently consolidated at 1.3268, falling 0.87%.
The pair was likely to find support at 1.3165, the low of October 3 and an almost 10-month low and resistance at 1.3381, the session high.
EU leaders agreed Friday to implement stricter budgetary rules across the euro zone and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.
But investors remained skeptical over whether the measures were far-reaching enough after the European Central Bank indicated that it had no plans to increase its bond purchasing program, capping its weekly bond purchases at EUR20 billion.
Earlier Monday, Standard & Poor’s chief European economist said Friday’s agreement was a significant step in resolving a “crisis of confidence,” but warned that time is running out and more action is needed.
The comments came after S&P placed the credit ratings of 15 euro zone members, including France and Germany, on watch for a potential downgrade last week.
Sentiment was also hit after ratings agency Moody’s warned that the debt crisis in the euro zone was still in a “critical” and “volatile” stage, adding that the region still faced increasing risks to cohesion.
The euro was also lower against the pound, with EUR/GBP shedding 0.56% to hit 0.8493.
Also Monday, Italy’s Treasury sold the full targeted amount of EUR7 billion of 12-month government bonds at an average yield of 5.95% compared to 6.08% at a previous bond auction last month.
Following the auction, the yield on Italian 10-year government bonds climbed back towards the near unsustainable levels hit last month, rising to 6.91%.
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