Forex - EUR/USD erases gains on Portugal, weak U.S. data

Forexpros - The euro erased gains against the U.S. dollar on Tuesday, slipping to a session low as concerns over Portugal’s debt burden and unexpectedly weak U.S. data saw investors dump the single currency in favor of the relative safety of the greenback.

EUR/USD pulled away from 1.3213, the session high, to hit 1.3127 during U.S. morning trade, slipping 0.11%.

The pair was likely to find support at 1.3076, Monday’s low and resistance at 1.3226, Monday’s high and a six-week high.

Sentiment on the euro soured as the yield Portugal’s 10-year government bonds remained close to Monday’s euro-era highs at 16%, fuelling concerns that Lisbon may need a debt restructuring deal similar to Greece’s.

In the U.S., a report showed that manufacturing activity in the Chicago area declined unexpectedly in January.

The Chicago purchasing managers’ index declined to a seasonally adjusted 60.2, from a reading of 62.5 in December.

Analysts had expected the PMI to rise to 63.0 in January.

A separate report showed that U.S. consumer confidence deteriorated unexpectedly in January, falling to 61.1 from a reading of 64.8 in December and confounding expectations for an increase to 68.2.

The weak data underlined concerns over the outlook for the U.S. economic recovery, after the Federal Reserve pushed back the timing of likely interest rate hike to mid-2014 last week.

The euro had climbed to a session high against the greenback earlier, after Greek Prime Minister Lucas Papademos said that negotiators had made "significant progress" in talks aimed at reaching a debt restructuring deal with the country’s private creditors and aimed to have a definitive agreement in place by the end of this week.

The euro also found support after European Union leaders agreed on a fiscal pact to tackle the causes of the debt crisis in the region and signed off on the details of a EUR500 billion permanent bailout fund for the euro zone that will come into force in July.

The euro was also lower against the pound, with EUR/GBP shedding 0.49% to hit 0.8327.

Also Tuesday, data showed that the S&P/Case-Shiller U.S. home price index fell more-than-expected in November, declining for the 17th consecutive month.