The dollar was able to regain some of its recent losses after German officials dampened expectations for a solution to the eurozone crisis at this weekend’s EU summit. G20 Finance Ministers commented that they believe this weekend’s EU summit to deliver a comprehensive plan to deal with European fiscal measure and the ESFS.
Many investors are focused on the details of a European bank recapitalization which should be the key event this week at EU summit on Sunday. Market participants are looking for a cure-all, but are become leery after German Chancellor Angela Merkel made cautious comments related to Sunday’s meeting. Merkel expects a comprehensive plan towards mitigated issues related to euro-zone debt, but warned against hoping that all of Europe’s issues would be cured.
The Dollar also benefited from better than expected manufacturing numbers released in the US on Monday. Industrial Production increased 0.2%, with small increase in manufacturing. The Federal Reserve report reflected overall production was unchanged in August, revised down from a previously estimated 0.2% increase. The Federal reserve also released information of factory capacity rates. Capacity utilization increased to 77.4% month over month, up from 77.3% in August. Economists surveyed had expected an increase of 0.2%.
The Euro had held its ground in the Asian and European trading session but came under pressure after Merkel’s comments early in US trading. The currency pair tested resistance near the 50-day moving average, but failed to make further headway and declined toward 1.3750 near the lows for the prior three trading sessions. The EUR/USD is still in a recent uptrend, and with the 10-day moving average crossing above the 20-day moving average, upside momentum should continue to help buoy the currency pair. Traders should look for a close above 1.3920 to confirm an upside breakout in the EUR/USD.