The euro opened New York trading (8:00 am) at 1.3555 close to the day's high of 1.3568 reached after Fitch Ratings put U.S. Treasury bonds on 'Rating Watch Negative', the first step toward cutting the agency's AAA rating on U.S. government debt.
Fitch's announcement had coincided with reports that the talks to resolve the U.S. debt crisis had stalled with the ostensible deadline looming tonight at midnight and that pushed the euro to its high just after the U.S. open.
With the euro essentially range bound between 1.3450 and 1.3600 for the past month offers blocked any movement higher and within 30 minutes started the sell-off that lasted the rest of the morning hours. There was a brief consolidation around 1.3520, the fall having been helped by reports that House Speaker John Boehner was ready to support the Senate bill worked out by Majority Leader Harry Reid and Minority Leader Mitch McConnel.
As the deal began to seem solid and imminent the dollar continued to gain forcing the euro to 1.3473, its lowest since September 30th just after the London close.
With many news reports but few verified facts short covering was inevtiable and the euro snapped to 1.3495. When the Senate deal was confirmed the euro dropped again to 1.3477 but by now the good news had run its course and there was another sharp bout of covering driving first to 1.3499 and then 1.3510. There was some resistance at 1.3515 but as the market was still well below the high of 1.3568 more short covering brought the united currency to 1.3535, also the 21 day moving average (1.3536,) to close at 1.3534.
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