Euro Recovers, BUT Pound Sterling & Dollar Expected to Maintain Upper Hand

At the time of this article's last update we see the following levels:

• The euro dollar exchange rate (EUR/USD): 0.09 pct higher at 1.2858.
• The euro to pound exchange rate (EUR/GBP): 0.02 pct higher at 0.7841.
• The euro to Australian dollar (EUR/AUD): 0.43 pct up at 1.4471.

Be aware that all the above quotes here are taken from the wholesale spot markets; your bank will affix a spread that could disadvantage you by up to 5% on currency transactions. An independent provider will however aim to get you as close to the market rate as is possible. Please find out more.

Today's Data: German Services PMI Gives Hope

There is a raft of PMI figures out of the Eurozone for markets to take note of on Tuesday.

Some euro buying will have been prompted by French manufacturing PMI which read better than expected at 48.8. However, the real positive came from Germany where Services PMI read at 55.4 vs 54.6 expected.

Euro Dollar Rate Breaks Lower Through Key Level

The euro is enjoying a rare period of strength at the current time, The euro dollar exchange rate EURUSD saw a 0.77% swing at the close of the preceding week - a move that is seen to be imposing residual weakness at the current time.

"The pair broke key support levels at 1.29 to post a low of 1.2823, the pair has rebounded from the lows to move to trade around the 1.2860’s this morning, just short of resistance at 1.2896," says a note from foreign exchange brokerage IFX.

Euro Pound Breaks Support - Potential for Further Losses

Against the euro we see the pound sterling remains on course to test highs last seen in 2012.

The euro pound exchange rate (EUR/GBP) has broken its support at 0.7874,  "opening the way for a test of the key support at 0.7755," says foreign exchange analyst Luc Luyet at Swissquote Research.

Furthermore, Luyet reckons the short-term technical structure is negative as long as prices remain below the resistance at 0.7915 (18/09/2014 high).

Another resistance stands at 0.8010 (16/09/2014 high).

"In the longer term, the underlying downtrend favours a test of the major support area between 0.7755 (23/07/2012 low) and 0.7694 (20/10/2008 low) at minimum. A break of the resistance at 0.8034 (25/06/2014 high) is needed to suggest some exhaustion in the medium-term selling pressures," says Luyet.

Why is the Euro Advancing Against the Australian Dollar?

One currency pair worth keeping an eye on at the present moment is the euro / Australian dollar which has risen sharply.

The Aus dollar has been hit by comments from China’s Finance Minister at the G20 Meeting in Australia.

The minister suggests that recent policy easing may be limited despite China's recent economic deceleration.

"These remarks have seen Dollar Bloc losing ground against the greenback, while sterling and the EUR outperformed," notes Shaun Osborne at TD Securities.

The trend for the AUD appears to be lower for now, as noted by Karen Jones at Commerzbank who is keeping an eye on the AUD/USD:

"AUD/USD came under further downside pressure last week, and starts this week looking still vulnerable. We target the .8840/78.6% retracement of the move seen this year en route to .8660 this years low. We do have the March low just ahead of here at .8891.

"Current Position: Short .9080 Recommended Trade: lower the stop from .9040 to .9000. Exit .8660."