At the beginning of a new week, the U.S. dollar reversed to the downside affected by the optimism seen in the market, where investors' appetite for riskier currencies and other investments improved especially after the upbeat jobs report for the world's largest economy and the steps taken by European lawmakers to quell jitters and fears regarding a Greek default in attempts to prevent the contagion of the crisis from expanding to other large economies in the zone such as Italy and Spain.
We can see the euro advanced against the U.S. dollar and also against the sterling pound, especially after the French President, Nicolas Sarkozy and the German chancellor, Angela Merkel were able to find common groundS and agreed on the need to recapitalize European banks in order to secure the banking sector from the debt crisis and also to ensure that European banks have sufficient capital and liquidity.
Moreover, Germany released the trade balance and current account figures for August today, which showed that the German economy has finally rebounded a bit to the upside, where the surplus widened beyond expectations to 11.8 billion euros from 10.5 billions, while exports unexpectedly expanded 3.5% from the prior drop of 1.2%, which has supported the to common currency rebound against the dollar, and also supported the European equities to open in green, which supported optimism to spread further in the market.
In addition, Olli Rehn told reporters in Helsinki today that European lawmakers should quicken the implementation of the European Stability Mechanism (ESM), which could also function along side with the European Financial Stability Facility (EFSF); these steps taken by the European Union could maintain financial stability and support nations to overcome the financial imbalances, which supported the common currency to gain more strength against the low yielding currency and the sterling pound.
Concerning the EUR/USD, the pair inclined today after the opening in Asia at 1.3388, to record the highest at 1.3603 and the lowest at 1.3376, while the pair trades now around 1.3582, extending the gains recorded in the past week.
Technically speaking, consolidation above 1.3475 supports the upside movement to extend further towards 1.3620 and maybe 1.3680. But, a breach of 1.3350 should negate the bullish outlook
The EUR/GPB pair also inclined after opening the Asian session at 0.8601, recording a high of 0.8688 and a low of 0.8600, and is currently hovering around 0.8682.
The U.S. dollar weakened not only against the euro, but also against other major currencies including the royal currency, the Swiss franc, the Japanese yen and the Canadian dollar, which confirms the positive outlook and the optimism seen in the market, especially when all the European equities are trading in green.
The U.S. dollar index (USDIX) opened at 78.71, and set the highest at 78.77 and the lowest at 77.74, and is currently trading around 77.80.
Concerning the USD/CHF, the pair reversed sharply to the downside, affected by the weakening U.S. dollar, where the pair opening the session in Asia at 0.9268 and reached the highest at 0.9271 and the lowest at 0.9049 and is currently trading around 0.9068.
Finally, the USD/CAD pair retreated to a low of 1.0272, after opening the session at 1.0386. The pair also reached a high of 1.0383 and is trading now around 1.0287.