Forex - EUR/USD drops on Portugal fears, weak U.S. data

Forexpros - The euro fell against the U.S. dollar on Tuesday as worries over Portugal’s debts and surprisingly weak U.S. economic data triggered investors to sell the euro for the relative safety of the greenback.
 
EUR/USD traded to a high of 1.3213 and posted a low of 1.3042. It is currently trading at 1.3065, down 0.62% on the session.
 
The pair was likely to find support at 1.2962, the low of January, 24 and technical resistance exists at 1.3226 Monday’s and six week high.
 
Yesterday, the single currency was weakened as the yield on Portugal’s ten year bonds soared 199 basis points hitting a euro era record of 17.22%. Credit default swaps also climbed to a record in the struggling nation, indicating a 71% chance the government will default.
 
However Prime Minister Pedro Passos Coehlo calmed the markets by saying the debt is “perfectly sustainable” and there is no risk of writedowns on the bonds.
 
The single currency found support as European leaders meeting in Brussels reached an agreement on a fiscal discipline treaty that includes sanctions for high deficit states and demands members to create laws to limit budget shortfalls.
 
In addition, the leaders also decided to launch the European Stability Mechanism on July 1st, one year ahead of the original plan.
 
However, Britain and the Czech Republic refrained from agreeing with the treaty.

The unemployment rate hit a two decade low in Germany further supporting the euro on this bearish day.
 
Meanwhile in the U.S., consumer confidence surprisingly dropped to 61.1 missing expectations for a climb to 68.2 from December’s 64.8.
 
In additional U.S. news, the S&P/Case Shiller home price index dropped more than expected in November, falling for the 17th consecutive month.
 
The euro fell against the pound with EUR/GBP giving back 0.85% to 0.8294.
 
Investors are awaiting euro zone’s preliminary consumer price inflation numbers. 
 
The ADP employment numbers,  the ISM manufacturing index, as well as crude oil stockpiles are on tap in the U.S. on Wednesday.