EUR/USD: Euro trading lower ahead of inflation data in the Euro-zone

January 15, 2013

EURUSD Movement

For the 24 hours to 23:00 GMT, EUR rose 0.14% against the USD and closed at 1.3377.

The greenback came under pressure, after the Federal Reserve Chairman, Ben Bernanke urged the US lawmakers to lift the country’s borrowing limit to avoid a potentially disastrous debt default, warning that the economy was still at risk from political gridlock over the deficit. He further added that raising the legal borrowing limit was not the same as authorizing new government spending.

He also attempted to reassure investors that the Federal Reserve’s money-printing programs would not lead to higher inflation.

Earlier yesterday, the Federal Reserve Bank of San Francisco President, John Williams, said that he expected that the Fed would need to continue buying bonds “well into the second half of 2013.”

However, the Federal Reserve Bank of Atlanta President, Dennis Lockhart, stated that the bond buying program is not unbounded and would have an adverse effect on market functioning and financial stability, if continued for long.

In the Euro-zone economic news, industrial output in the Euro-zone dropped 3.7% annually in November, compared to a revised 3.3% drop recorded in October.

Meanwhile, wholesale prices in Germany rose 3.2% annually in December, compared to a similar rate of growth recorded in November, whereas on a monthly basis, the wholesale price index remained flat in December, following a 0.7% fall in November.

In the Asian session, at GMT0400, the pair is trading at 1.3357, with the EUR trading 0.15% lower from yesterday’s close.

The pair is expected to find support at 1.3328, and a fall through could take it to the next support level of 1.3300. The pair is expected to find its first resistance at 1.3393, and a rise through could take it to the next resistance level of 1.3429.

Later today, investors would focus on the rate of inflation in several European countries, which could suggest the trends in the pair. Higher than expected rate of inflation would suggest that the European Central Bank will have to curtail economic stimulus measures.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

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