The EUR rose as high as 1.45 following a strong PMI surveys but the gains failed to hold after a disappointing ZEW survey and a rise in Greek bond yields reminds investors the European debt crisis is not going anywhere.
PMI surveys for both Germany and the euro zone were above expectations. German manufacturing PMI came in at 52.0 on consensus forecasts of 50.9 and EZ manufacturing dropped to 49.7 from 50.4 on expectations of 49.6. German ZEW sentiment came in on the downside of expectations, falling to -37.6 from -15.1. The EUR rally ran out of steam at the 1.45 level the same time the ZEW survey was released and willing offers stood at the big round number.
Also weighing on the EUR was a rise in Greek 2-year yields to almost 38%, hovering near the all-time high of 40.4%. This highlights the tension that remains in the euro zone given the requests for collateral from some European nations in return for approval of the July 21st amendment to the Greek bailout. The issue could continue to weigh on the euro given Eurobonds are a non-starter according to both Merkel and Sarkozy.
This EUR/USD surged as high as 1.4500 before encountering selling interest and the release of the disappointing German ZEW economic sentiment where the EUR/USD fell back to 1.4440. Initial support is located at 1.4400. Additional support is found at 1.4350 followed by the rising trend line from the July lows at 1.4200. To the upside the pair could be capped between 1.4500 and 1.4540 leading up to Bernanke’s Jackson Hole speech on Friday.
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