Forex - Weak U.S. manufacturing eases EUR/USD higher

Investing.com - The euro eased higher against the U.S. dollar  Wednesday, after data showed that manufacturing activity in the Chicago area contracted for the second consecutive month in October, casting doubts on the strength of the U.S. recovery.

EUR/USD pulled back from 1.3019, the pair’s highest since October 25, to hit 1.2962 during U.S. afternoon trade, up 0.03% on the session.

The pair was likely to find support at 1.2885, Tuesday’s low and resistance at 1.3019, the session high.

Kingsbury International said its Chicago purchasing managers’ index rose to 49.9 in October from a reading of 49.7 the previous month. Analysts had expected the index to improve to 50.0 in October.

Overall market sentiment remained supported by gains in equities as U.S. markets reopened following a two-day closure for Hurricane Sandy.

Earlier Wednesday, Spanish Prime Minister Mariano Rajoy said his country needs the help of the European Union to meet its budget goals, before adding that EU progress on a banking union would allow leeway on making a formal request for aid.

Speaking in the Spanish Parliament, Mr. Rajoy also said that an agreement on direct bank recapitalization is getting closer and that such an agreement would improve market confidence.

Elsewhere, official data showed that the unemployment rate in the euro zone climbed to a record 11.6% in September, from an upwardly revised 11.5% in August, adding to concerns over the deepening impact of the region’s debt crisis.

Earlier Wednesday, official data showed that German retail sales rose 1.5% in September, the fastest pace since June 2011, easily beating expectations for a 0.3% increase.

The euro was down against the pound, with EUR/GBP dipping 0.22% to 0.8045, but remained higher against the yen, with EUR/JPYup 0.37% to 103.57.

In other news Wednesday, the euro group of euro zone finance ministers held discussions on Greece’s progress towards meeting austerity targets. 

Following the talks, the ministers urged Greek authorities "to solve remaining issues” and said they would hold further discussions on November 12 after they have received the troika’s report on Greece.