Forex Intraday Round-Up: China Manufacturing and Agreement on Cyprus Bailout Buoy The Euro
**The Euro Advances Buoyed By China Manufacturing Data, Impending Cyprus Bailout and Hopes of Greek Resolution**
The single currency continued scoring gains against the US dollar reaching a session and three-weeks high of 1.2886.
According to Bloomberg the euro rally was a result of a preliminary reading of China’s manufacturing activity which rose to 50.4 in November from 49.5 in the previous month. For the first time in 13 months the world’s second biggest economy managed to push over the 50 mark, which separates contraction from expansion.
“China is looking OK now and that’s marginally positive for the euro,” said Geoff Kendrick, head of European currency strategy at Nomura International, as quoted by Bloomberg. “It’s going to be a fairly quiet day because of the holiday in the U.S.”
Another factor weighing in on the euro’s positive performance was the announcement by Cyprus President Christofias that an imminent agreement with the Troika on a bailout package has been reached. Finance Minister Vassos Shiarly said the amount borrowed would be around €17 billion (£13.7 billion) but talks are still ongoing. Fitch, one of the three internationally recognized credit rating agencies, downgraded Cyprus’ rating to BB- or non-investment grade “junk” status.
Positive news also came from the manufacturing PMIs released by Markit, which showed surprising upswings in Germany (46.8), France (44.7) and the Eurozone (46.2). Despite the improvements, all of the readings point to ongoing contractions.
At 11.55 GMT the EUR/USD was changing at 1.2878/79 or 0.38 percent higher. Support is seen at former resistance of 1.2840 and as long as the pair hold above that mark, EUR/USD is likely to extend towards 1.2890 and the psychological level of 1.2900.
If market sentiment is not enough to fuel the bullish trend, downside support below 1.2840 is seen at 1.2820/30.
**The Pound Retracts From Session High Pushed By Negative UK Data**
After reaching a session high of 1.5981, the GBP/USD plummeted by around 30 pips and at 12.10 GMT was trading at 1.951/54.
!m[The British Pound Looses Ground on Weak UK Data](/uploads/story/879/thumbs/pic1_inline.png)“The GBP/USD’s consolidation from the 1.5820 boundaries is still in progress as the pair succeeded in flirting with the weekly suggested entry point around 1.5960” opined the technical analyst team at IGN.com as quoted by FXstreet.com.
Support levels for the pair are seen at 1.5925, 1.5880 and eventually 1.5850. The CBI Industrial Trend Survey showed a result of -21.0 in November against expectations of -19.0 and down from -23.0 previously. Because of Thanksgiving holiday, no economic data is expected from the US today.
The British pound weakened against the euro and at 12.15 GMT the EUR/GBP pair was in positive territory trading at 0.8071/73 or 0.37 percent higher than yesterday. “Although sterling has received some support from the situation in the Eurozone, there are some challenges in terms of economic fundamentals that could limit any rebound in sterling,” said Ian Stannard, the head of European currency strategy at Morgan Stanley, as quoted by Bloomberg.
**The Australian Dollar Registers Modest Gains With Volatility at 5-year Low**
The Aussie is in positive territory against the dollar rebounding off of an intraday low of 1.0352 and trading at 1.0377/79. The AUD/USD was given support by the better than expected data from China yet the gains are modest as volatility in the pair remains low. “Currently the AUD/USD has the lowest implied volatility since Feb 2007, which fits our ongoing neutral bias.” said Sean Callow, global strategist at Westpac. A deal on Greece’s bailout package next week might help the Aussie indirectly and the pair is expected to score further gains as the US markets remain cautious due to uncertainty around the fiscal cliff.
Measures of resistance calculated by analysts at ICN.com are at 1.0385, 1.0420 and ultimately 1.0440. No further indicators from the Australian or US economies are expected till the rest of the day.