Forexpros – The euro ended the week sharply lower against the U.S. dollar on Friday, hovering close to a 15-month low as renewed concerns over the euro zone’s financial crisis continued to weigh on the single currency.
EUR/USD hit 1.2857 on Thursday, the pair’s lowest since September 14, 2010; the pair subsequently consolidated at 1.2959 by close of trade on Friday, retreating 0.75% over the week.
The pair was likely to find support at 1.2857, the low of December 29 and resistance at 1.3064, the high of December 14.
Trading volumes remained low seeing as many traders closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing volatility.
The euro tumbled to a one-year low against the greenback on Wednesday after Italy’s Treasury sold EUR9 billion euros of six-month bills, at an average yield of 3.25%, down from 6.50% in a previous auction in November. The country also sold EUR1.73 of two-year zero coupons at 5%.
Despite the upbeat results, a second sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
The single currency extended losses on Thursday after Italy sold just over EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
Following the auction, the yield on Italy’s 10-year bonds traded at 7.1%, above the critical 7% threshold widely seen as unsustainable in the long-term.
The sale was seen as the first test of European banks’ willingness to purchase long-term sovereign debt of distressed euro zone countries, following last week’s nearly EUR500 billion cash infusion by the European Central Bank.
Markets were also jittery as the ECB said that its overnight deposits receded to EUR436 billion, after hitting a record of EUR452 billion the previous day, underscoring European banks’ nervousness to lend to each other.
But sentiment found mild support after data showed that U.S. pending home sales rose far more-than-expected in November, surging 7.3% after a 10.3% increase the previous month.
Analysts had expected pending home sales to rise 1.7% in November.
In a separate report, market research group Kingsbury International said its Chicago purchasing managers’ index dipped to 62.5 in December from a reading of 62.6 in November, which was the highest since April.
The data came after the U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits in the week ending December 23 rose to 381,000, disappointing expectations for a rise to 370,000.
Despite, the increase claims have fallen below 400,000, a level historically associated with an improving labor market, in seven of the past eight weeks.
In the week ahead trading volumes are expected to remain light. The U.S. is to release key reports manufacturing activity, jobless claims and non-farm employment change, while the euro zone is to release data on retail sales and unemployment.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, January 2
Markets in the U.S. will be remaining closed for a national holiday.
Tuesday, January 3
In the euro zone, official data is to be published on German unemployment change, a key signal of overall economic health.
Later Tuesday, the U.S. is to publish data on manufacturing PMI. The Federal Reserve is also to release the minutes of its latest policy-setting meeting.
Wednesday, January 4
The euro zone is to produce official data on French consumer spending, which accounts for the majority of overall economic activity. Later Wednesday, a preliminary report is to be released on consumer price inflation in the single currency bloc.
Meanwhile, the U.S. is to publish government data on factory orders, a leading indicator of production.
Thursday, January 5
In the euro zone, official data is to be published on German retail sales, the primary gauge of consumer spending.
Elsewhere, the U.S. is to publish industry data on non-farm employment change, a key indicator of consumer spending, followed by weekly government data on unemployment claims. The country is also to release a report by the Institute for Supply Management on non-manufacturing PMI as well as data on crude oil stockpiles.
Friday, January 6
The euro zone is to publish official data on retail sales, a primary gauge of consumer spending, as well as reports on the unemployment rate in the single currency bloc and German factory orders, a leading indicator of production.
The U.S. is to round up the week with a government reports on non-farm employment change and the unemployment rate. The country is also to release government data on average hourly earnings, a key indicator of consumer inflation.
Forexpros
