Published: Mon, 02 Feb 2009 19:35:26 +0100

Euro Moves Higher as ISM Surprises to the Upside

This afternoon the euro is trading just off session highs. Most strategists agree that it is only a matter of time before the currency starts to weaken again.

Economist Steve Butler said he is expecting the U.S. dollar to continue to win out as more bad news comes from Europe. He added that the "fear of the unknown" is a big factor that is boosting risk aversion sentiment.

"I think the U.S. dollar is going to continue to be the lesser of all the evils for the time being," he said.

George Davis, chief technical analyst at RBC Dominion Securities, said it is just a matter of time before the euro tests key support at the 1.2660 level. He pointed out that the downtrend is still in place as any bounce higher "lacks conviction."

"This is a typical bear market correction," he said. "The bears are still very much in control."

The ECB's interest rate decision will be the main event of the week and Davis expects the euro to remain under pressure ahead of Thursday's meeting. He added that there is a good chance the euro will hit the October lows.

The euro was up 0.0045 to 1.2857 against the American dollar.

The euro was up 0.0259 to 1.6008 against the Canadian dollar.

The pound sterling was down 0.0262 to 1.1087 euros.

The euro was up 0.09 points to 115.32 against the yen.

All Data taken at 1:31 p.m. EST.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca

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