Euro Off 2-Year High After Euro-Area PMI Data, Dollar Remains Broadly Lower

London (Oct 25)  After posting two-year high at 1.3822 against the U.S dollar, we've seen the single currency retracing down as weaker-than-expected euro-area flash Purchasing Managers’ surveys pulled it away from a its highest levels in 2 years struck earlier in the session.

Eurozone business activity unexpectedly slowed in October, but signaled an expansion for a fourth month running. Markit's flash PMI survey revealed that the Eurozone's composite reading fell from 52.2 in September - a two-year high - to 51.5 in October.

Services sector fell to 50.9 in October from 52.2 in September, while manufacturing growth ticked up to 51.3 this month, from 51.1 in September.

EURUSD pulled back from 1.3822, the highest since November 2011. The pair subsequently consolidated at 1.3787, still up for the day. The pair was likely to find support at 1.3740 and might continue upward to reach resistance at 1.3850.

Investors will closely watching the European leaders EU summit which began in Brussels with fresh allegations of U.S. spying on German Chancellor Angela Merkel threatening to overshadow talks. EU leaders will also discuss Europe's economic recovery and immigration.

A separate PMI survey on Chinese manufacturing activity hit a seven-month high in October, buoyed by strong new orders and raising optimism that the world's second-biggest economy may be recovering concerns over rising money market rates in China, lifting riskier currencies such as the Australian dollar.

Yet, Aussie gains were limited as China's benchmark seven-day repo rate rose nearly a full percentage point on Thursday after the central bank let cash flow out of the money market for the second straight week.

The AUDUSD pair reversed early gains during European trades to hover around 0.96140, after it kick started today's session at 0.96159. The pair will likely find resistance at 0.9675 levels.

As for the U.S. dollar, the USDIX index was last seen at 79.236, having dropped to as low as 79.081. the index will likely find resistance at 79.86 levels.

The dollar remained broadly weaker amid expectations that the Fed will delay plans to start tapering stimulus after weak U.S. jobs data on Tuesday suggested the U.S. recovery was not yet on a firm footing.

The dollar, however, held steady against the yen at 97.25 yen hovering just above a two-week low of 97.155 yen set in the previous session.

The USDJPY currency pair is forming a consolidation pattern and is attempting to move to the upside but it’s not confirmed yet in light of the extending negativity showing on Linear Regression Indicators.

The dollar fell to 23-month lows against the traditional safe haven Swiss franc, with USDCHF down to 0.89110 after opening at 0.89199.