Published: Wed, 08 Apr 2009 14:41:50 +0200

Euro Weighed Down by Data and Negative Sentiment

(CEP News) - Weaker global equities and softer European data are once again weighing down the euro against the U.S. dollar on Wednesday morning.

EUR/USD is showing some signs of modest recovery ahead of the North American open. However, the cross remains near the bottom of the channel, trading in the mid-1.32 USD level.

In overnight trading, negative sentiment dragged the euro to a weekly low at 1.3148 USD, which strategists from Brown Brothers Harriman say is below the 100 day-moving average.

The strategists said EUR/USD failed to test support at 1.31 USD, which could lead to a modest recovery during the North American session.

However, some currency strategists said that the weaker European data could limit any gains on Wednesday. Euro zone data continues to show a slumping economy. German authorities reported that German factory orders fell 3.5% month-over-month in February, worse than the 2.1% drop expected and adding to January's 6.7% contraction.

Meanwhile, Germany's trade surplus rose to €8.7 billion in February from the previous month's downwardly revised €7.0 billion level. Economists had expected a smaller gain to €7.5 billion.

Currency strategists from KBC said they are neutral on EUR/USD as it continues to bounce in its broad range with support at 1.3113 USD and resistance at 1.3738 USD. With the Easter holiday approaching, they added that tight liquidity conditions could cause extreme volatility in currencies.

"Given the brisk change in investor sentiment over the previous days, we're not in a hurry to add/reinstall EUR/USD positions," they wrote in a research note. "Investors turned more cautious ahead of the Q1 earnings season and this also triggered the standard reaction on the currency markets. The dollar and the yen are attracting safe haven flows. The euro is pushed into defense."

Euro/USD down 0.19 cents to 1.3252

USD/CAD down 0.58 cents to 1.2315

USD/Yen down 0.23 points to 100.19

GBP/USD up 0.04 cents to 1.4735

AUD/USD up 0.10 cents to 0.7117

Euro/Yen down 0.52 points to 132.77

Euro/GBP down 0.13 pence to 0.8995

GBP/CAD down 0.80 cents to 1.8146

CAD/Yen up 0.18 points to 81.35

Euro/CAD down 1.00 cents to 1.6320

The U.S. Dollar Index is down 0.01 points to 85.27

All data taken at 8:36 a.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca