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Forex - EUR/USD trims losses from politically charged selloff

Published 04/23/2012, 07:52 PM
Updated 04/23/2012, 07:54 PM
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Investing.com - The euro on Tuesday reversed earlier losses stemming from results in French elections, the collapse of the Dutch government and weak economic data out of Germany.

In Asian trading on Tuesday, EUR/USD was trading at 1.3154, down 0.01%, up from a session low of 1.3153 and off from a high of 1.3159.

The pair was likely to find support at 1.2996, the low on April 16, and resistance at 1.3228, Friday's high.

The euro, which spent two days rising against the greenback, plunged in U.S. and European sessions in wake of French President Nicolas Sarkozy's loss to Socialist challenger François Hollande in Sunday's elections, leaving both candidates headed to a runoff in May.

However, right-wing candidate Marine Le Pen took nearly 20 percent of the votes, well above expectations, which may underscore growing frustration with the crisis and its painful austerity measures.

Hollande has said he does not favor current austerity measures and wants to rewrite the eurozone’s fiscal pact in a way to focus more on growth.

In the Netherlands, a breakdown in budget negotiations prompted Dutch Prime Minister Mark Rutte to offer his cabinet's resignation to the Dutch queen, who will consider it, although the government will keep plugging away to find an exit strategy from the impasse.

Meanwhile in Germany, Europe's largest economy, the country's important manufacturing sector may be suffering from dropping demand in the crisis-wracked periphery countries.

Markit's manufacturing Purchasing Managers Index for Germany dropped to 46.3 in April from 48.4 in March, far below expectations for an increase to 49.0.

The index hasn't fallen that low since 2009.

Eurozone output data also disappointed.

Concerns Chinese manufacturing may be cooling also sparked demand for safe-haven currencies like the dollar and yen, which sent the euro falling before it regained strength.

The euro, meanwhile, was up against the pound and down against the yen, with EUR/GBP trading up 0.04% at 0.8159 and EUR/JPY down 0.08% and trading at 106.72.

Later Tuesday, the U.S. will unveil data on house price inflation, a key indicator of the housing industry’s health, as well as a Conference Board report on consumer confidence and government data on new home sales.

In the eurozone, official data is to be produced on industrial new orders, a leading indicator of production, followed by a report on the business climate in Belgium.






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