The euro rose to its highest level in two months against the dollar on Wednesday after a break of key technical resistance around $1.2260 triggered broad-based dollar selling. Chart-inspired trading dominated the market as a succession of strong US economic data in recent sessions has failed to boost the dollar with investors seeing expectations for dollar-supportive US interest rate hikes as already priced in.
Investors are awaiting Friday's US jobs data to cement US rate hike expectations ahead of the Federal Reserve's meeting next week.
"There was chart resistance at $1.2258 and once that was broken there were a lot of stops taken out and we saw a sharp move," said Johan Javeus, currency strategist at SEB in Stockholm.
"We also have improvement in European data which is going from all very poor to a bit firmer. US data is improving but inflation is benign. That is making investors a bit less hawkish about what the Federal Reserve is going to do beyond August."
By 1130 GMT, the euro had risen one percent on the day to a two-month high of $1.2321, and was closing in on the next key chart level of $1.2360.
A survey showed growth in the eurozone service sector nudged up last month as new business strengthened. The eurozone services PMI edged up to 53.5 in July from 53.1 in June.
Eurozone retail sales grew a higher than expected 0.9 percent in June.
The dollar was slightly weaker on the day versus the yen at 111.24 as the market weighed the fate of Japanese Prime Minister Junichiro Koizumi's controversial postal reform bills.
The upper house of parliament is expected to vote on the bills on Friday, with a rejection seen triggering a snap election.
The Reuters monthly survey of more than 50 currency strategists showed the euro recovering to $1.27 in 12 months' time and the yen appreciating to 101 per dollar.
In recent sessions, the euro has been drawing support from talk of euro demand from central banks who are diversifying away from dollars.
Comments
Comments are closed.