Forex - EUR/USD slips lower on weak ISM, Moody's downgrade

Investing.com - The euro traded lower against the U.S. dollar Tuesday as a report revealed manufacturing activity in the U.S. contracted for the third consecutive month in August, as traders anticipate details of the European Central Bank’s bond purchasing program.

EUR/USD hit 1.2559 during U.S. morning trade, the pair’s lowest since Friday; the pair subsequently consolidated at 1.2566, slipping 0.21%.

The pair was likely to find support at 1.2492, Friday’s low and near-term resistance at 1.2636, Friday’s high and a two-month high.

The Institute for Supply Management said its index of purchasing managers’ ticked down to 49.6 in August from 49.8 in July, compared to expectations for a reading of 50.0.

The report revealed that new orders fell, while inventories rose, indicating that sales are dropping and the number of new workers hired fell to the lowest level since late 2009.

The data came amid ongoing speculation over how close the Federal Reserve is to implementing another round of easing, after Fed Chairman Ben Bernanke said Friday that the bank would act as needed to strengthen the U.S. economic recovery.

Investors were looking ahead to U.S. government data on non-farm payrolls on Friday, to see if the labor market has improved.

Demand for the euro continued to be underpinned by expectations that the ECB will announce details of measures to help stabilize the region’s sovereign debt markets after its upcoming policy setting meeting on Thursday.

The single currency weakened as ratings agency Moody’s lowered its outlook on the European Union's triple-A rating to negative, from stable.

The euro was almost unchanged against the pound and the yen, with EUR/GBP dipping 0.04% to 0.7922 and EUR/JPY inching up 0.02% to 98.56.

In other news Tuesday, European Commission President Jose Manuel Barroso stated the ECB would be right to help ailing euro zone countries by purchasing their debt, as long as they committed to implementing economic reforms in return.