EUR/USD touches fresh three-week highs on euro zone economic outlook

The euro advanced to the strongest level in three weeks against the US dollar, as it remained supported by Thursdays upbeat euro zone data, which showed the economic recovery in the euro area is gaining traction.

Having reached a session high at 1.3738 at 11:38 GMT, EUR/USD traded at 1.3717 at 12:03 GMT, adding 0.15% for the day. Support was likely to be found at January 23rd low, 1.3529, while resistance was to be met at January 2nd high, 1.3775. Yesterday the pair rose by 1.06%, the largest daily advance since October 17th.

The euro continued to draw support after a series of upbeat reports yesterday showed higher-than-expected advance in the euro zone private sector, which boosted speculation the economic recovery in the euro area is gaining momentum.

Data showed the gauge of manufacturing output in the euro area increased to 53.9 in January, the highest in 2-1/2 years. According to the median analyst’ forecast the index should have increased to 53.0 from December’s reading of 52.7.

A separate report by Markit Economics, revealed its gauge of activity in the euro zone’s services sector advanced to 51.9 this month from 51.0 in the previous month. According to the median analyst’ estimate the index should have increased to 51.4.

Data on the same indicators also showed an improvement in the manufacturing output and services activity in Germany and France.

The gauge, which measures the output in the German manufacturing increased to 56.3 in January from 54.3 in the previous month. At the same time the gauge, which tracks the activity in the German services sector also advanced to 53.6 in January from 53.5 in the preceding month.

In addition, the gauge, which measures the output in French manufacturing also advanced to 48.8 in January from 47.0 in December. Moreover, the gauge, which tracks the activity in the French services sector rose to 48.8 in January from 47.0 in the preceding month.

“The data on manufacturing and services suggested the economic recovery in the euro region is gaining traction; the outlook is positive for the euro” said Jane Foley, a senior currency strategist at Rabobank International in London, cited by Bloomberg.

Meanwhile, demand for the US dollar continued to be underpinned by a recent string of overall optimistic reports, which boosted the view of further cuts in Federal Reserve’s monetary stimulus.

The Bureau of Labor Statistics reported on Thursday that the number of initial jobless claims in the United States rose by 1 000 to 326 000 in the week ended January 18th, from a revised down number of 325 000 during the previous week. Analysts had expected that the people who filed for unemployment assistance will increase to 330 000.

A separate report said that existing home sales in the country increased 1.0% to the annualized 4.87 million units in December, following a three-month streak of declines. According to data by the National Association of Realtors (NAR), existing home sales reached a seven-year high in December 2013 compared to December 2012. During the whole 2013 sales increased to 5.09 million units, or a 9.1% gain in comparison to the whole 2012. Experts had anticipated that existing home sales will reach the annualized 4.93 million units in December. November’s result has been revised down to 4.82 million from 4.90 million previously.

The average home price in the country was 198 000 USD in December 2013, or a 9.9% increase in comparison with the same month a year ago, which came as a result of weaker supply.

Elsewhere, having hit a 2-1/2-year high at 1.6668 at 08:10 GMT, GBP/USD traded little changed at 1.6629 at 10:27 GMT, losing 0.05% for the day. Support was likely to be received at January 23rd low, 1.6555, while resistance was to be encountered at May 2nd 2011 high, 1.6739.