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Federal Reserve `Rhetoric' May Push Euro Above 200-Day Average, CMC Says

The euro may strengthen about 3 percent and break through its 200-day moving average against the dollar if the Federal Reserve signals next week the U.S. economic recovery remains fragile, CMC Markets said.

“Contrasting economic data between the U.S. and the euro zone as well as the earnings performance on the banking sector continue to shore up the euro,”Ashraf Laidi, chief market strategist at CMC Markets in London, wrote in an e-mailed report today. “A little bit more help from Fed rhetoric will be crucial in extending euro-dollar to the all-important 200-day moving average.”

The euro snapped two days of gains and was 0.2 percent weaker at $1.3208 as of 2:28 p.m. in London, below its current 200-day moving average of $1.3561.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, dropped below its 200- day moving average yesterday for the first time since January.

The Fed is scheduled to make its next interest-rate decision on Aug. 10.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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