Forexpros – The euro was steady against the U.S. dollar on Friday, trading close to an eleven-month low as concerns over imminent downgrades in the euro zone and the handling of the region’s debt crisis continued to weigh.
EUR/USD hit 1.3197 on Wednesday, the pair’s highest since December 13; the pair subsequently consolidated at 1.3039, largely unchanged over the week.
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 remained thin ahead of the Christmas holiday weekend, resulting in quiet trade.
The euro rose to a six-day high against the dollar on Wednesday, before erasing gains as investors became cautious following an unprecedented EUR489.19 billion three-year loan by the European Central Bank.
Markets were hoping the move would avoid a credit crunch in the euro zone and 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 single currency bloc.
Investors were also jittery on Thursday amid a flurry of mixed U.S. data. A report by the U.S. University of Michigan’s said its index of overall consumer sentiment rose to 69.9 in December, exceeding expectations for a rise to 68.2, while a separate report showed that the number of people who filed for unemployment assistance in the U.S. in the week ending December 16 fell to the lowest level since April 2008.
The reports came after the U.S. Bureau of Economic Analysis said gross domestic product increased at a seasonally adjusted annual rate of 1.8% during the third quarter, down from a previous estimate of 2.0%.
The data primarily reflected a downward revision to personal consumption, which grew 1.6% compared to a previous estimate of 2.3%. Consumer spending typically accounts for nearly 70% of U.S. economic growth.
The single currency briefly found support after official data showed on Friday that U.S. home sales rose more-than-expected in November. A separate report showed that U.S. core durable goods orders also rose-more-than-expected last month, advancing 3.8% from 0.0% in October.
But gains were limited amid renewed concerns over a possible series of downgrades in euro zone countries.
The euro rallied against the greenback earlier in the week, after a successful Spanish bond auction, as well as an unexpected improvement in German business sentiment and upbeat U.S. housing data.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales, while Germany is to publish preliminary data on consumer price inflation.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday, as there are no relevant events on this day.
Monday, December 26
Markets in the U.S. and the euro zone will be remaining closed for the Boxing Day holiday.
Tuesday, December 27
The U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on consumer confidence and manufacturing activity in Richmond.
Wednesday, December 28
The U.S. is to release the treasury currency report.
Thursday, December 29
In the euro zone, Germany is to publish preliminary data on consumer price inflation, which accounts for a majority of overall inflation. Meanwhile, the European Central Bank is to publish a report on M3 money supply and private lending.
Later Thursday, the U.S. is to publish its weekly government report on initial jobless claims, as well as industry data on pending home sales, a leading indicator of economic health. The U.S. is also to release official data on crude oil stockpiles and industry data on business conditions in the Chicago area, a leading indicator of economic health.
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