Cautious Optimism Surround the Currency Markets As Europe's Crisis Concerns Ease

By @ibtimes on

Cautious optimism is spread in currency markets with the start of a pivotal week for the 17-bloc euro area, amid speculation that EU leaders will finally find the right combination of measures and rules to guide the debt burdened nations back to safety, sending the dollar below its peers and triggering demand for higher-yielding assets instead, including the euro and the pound.

In essence, investors were more optimistic at the start of the first trading session this week, after Italy's Premier Mario Monti presented a proposal of 30 million euros in austerity and growth measures to cut the cascading debt of his country, propelling trading to seek riskier and yielding assets accordingly.

In addition, French President and German Chancellor Angela Merkel called for new European treaty today after holding a joint conference in Paris, pushing to set out new rules for the European Union governments and tighten economic cooperation, fueling optimism that European leaders are moving to tackle the debt crisis.

The dollar dropped against majors today, extending drop following reports over the economic growth, as a governmental report showed that U.S services growth pace turned to be the slowest since February 2010, according to the ISM non-manufacturing report.

While the U.S department of Commerce showed signaled that the U.S orders of both durable and non-durable goods orders dropped unexpectedly in October, adding to concerns over the global economic recovery, but luckily, Europe's debt-crisis optimism actually offset bad news out from the U.S.

Accordingly, the dollar index which measures the performance of the U.S. dollar against a basket of currencies including the Euro, the Pound, and the Yen, fell from today's opening level of 78.61 to currently trade at 78.30 recording its highest level at 78.65 and its lowest at 78.19. Gold dropped to trade around $1729.95 per ounce from the opening price of $1753.31. Oil prices eased to reach $101.86 after opening at $101.36 per barrel.

The Euro rose against the US dollar today after opening at $1.3416 as the EURO/USD currently trades around $1.3452, while recording a high of $1.3486 and a low of $1.3398. If the pair breaches the key resistance at $1.3490, then the pair will be targeting the next resistance level at $1.3515, but the support level remains at $1.3425 at the meantime.

The British Pound rose against the dollar today after opening at $1.5605 levels, where the pair currently trades around $1.5675, while recording a high of $1.5716 and a low of $1.5587. If the GBP/USD breaches the key resistance level at $1.5680, then the pair will be targeting the next resistance level at $1.5660, now the $1.5660 level remains as the support level.

Moreover, the dollar declined against the Japanese Yen on Monday, after the USD/JPY pair started trading at ¥78.09, while recording the high of ¥78.10 and a low of ¥77.72 to currently trading at ¥77.78. Accordingly, the YSD/JPY pair is seeking to breach the key support at ¥77.60 and targeting the next the next support level at ¥77.30, but now, the pairs still trades below the resistance level of ¥78.10.

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