Following a better than expected debt auction by Portugal, traders bid the euro higher along with US equities. A strong report from the Fed was also supportive of higher yielding assets. Tomorrow the focus will remain on Europe with interest rate announcements expected from the Bank of England and the European Central Bank .
The euro rallied during the New York trading session following a successful debt auction by Portugal. Strong demand was seen for the debentures of the financially strapped nation but Portugal was forced to offer its bonds at a slightly higher than expected interest rate.
Traders have begun to target Portugal as the next European nation that will request financial assistance from the EU/IMF as the nation struggles to grow its way out of a high GDP to debt ratio. Talk among the financial press has expectations for Portugal to request aide as early as next week.
The Fed’s Beige Book was supportive of higher yielding assets this afternoon as the Fed’s report suggested the US economy is beginning to pick up the pace of growth in the manufacturing sector and hiring data was seen as positive in various regions of the country.
The EUR/USD was up sharply at 1.3130 after opening the day at 1.2989. The GBP/USD is trading higher at 1.5766 from 1.5635. The AUD/USD was up at 0.9945 from 0.9847. Spot crude oil was bid higher at $91.27 from $91.19. The Dow Jones Industrials Average was sent sharply higher by 0.7%.
Tomorrow Europe will once again be in the spotlight with interest rate announcements expected from the Bank of England and the European Central Bank. No changes to the interest rates are expected from either central bank but comments on the European debt crisis will be followed closely.Today’s appreciation may have set up an opportunity to enter short on the EUR/USD with savvy traders selling into rallies of the pair. The rally today halted at the 20-day moving average . A stop above this level may be appropriate. Further resistance may be found at the January 3rd low at 1.3250, a level that coincides with the 50-day moving average. Support is located at the November low of 1.2960, followed by the January low of 1.2870.