Investing.com - The dollar firmed against the euro on Tuesday after investors concluded the U.S. currency fell to far on Monday''s surprisingly weak U.S. factory data.
In U.S. trading, EUR/USD was trading at 1.3505, down 0.17%, up from a session low of 1.3494 and off a high of 1.3539.
The pair was likely to find support at 1.3478, Monday''s low, and resistance at 1.3717, the high from Jan. 27.
The dollar and U.S. stock markets took a beating on Monday after the Institute for Supply Management said its manufacturing index fell to a seven-month low in January, as new orders slumped.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit Economics reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
On Tuesday, however, the dollar regained ground, especially on sentiments that harsh winter weather may have played a role on economic indicators'' poor showing, though capping gains were fears that winter storms notwithstanding, the global economy still may be facing a soft patch.
Elsewhere, the Commerce Department reported earlier Tuesday that U.S. factory orders fell 1.5% in January, better than expectations for a decline of 1.7%.
The euro was down against the pound, with EUR/GBP dipping 0.13% to 0.8286, and up against the yen, with EUR/JPY trading up 0.48% at 137.24.
On Wednesday, the euro zone is to release data on retail sales, while Spain and Italy are to publish data on service-sector activity.
The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service-sector activity.