Forex - Euro little changed vs. dollar

The euro was little changed against the dollar on Tuesday, but the dollar looked likely to strengthen further amid expectations that the Federal Reserve will soon start to unwind its asset purchase program.

EUR/USD hit 1.2894 during European afternoon trade, the pair’s highest since Friday; the pair subsequently consolidated at 1.2866, dipping 0.02%.

The pair was likely to find support at 1.2810, Monday’s low and resistance at 1.2916, Friday’s high.

Data last week showing that the U.S. economy added more jobs than expected in June reinforced the view that the recovery in the labor market is on track.

Fed Chairman Ben Bernanke said last month the bank could begin tapering its USD85 billion-a-month asset purchase program by the end of 2013 if the economy picks up as the central bank expects.

The euro found some support after Greece secured its next tranche of financial aid from creditors overnight.

However, sentiment on the single currency remained fragile after European Central Bank President Mario Draghi reiterated Monday that interest rates will remain at low levels for an extended period of time.

Elsewhere, the euro advance to four month highs against the weaker pound, with EUR/GBP climbing 0.52% to 0.8650 after official data showed that U.K. manufacturing output fell unexpectedly in May, clouding the economic outlook.

U.K. manufacturing production fell 0.8% in May, compared to expectations for a 0.3% increase. Industrial production in the U.K. was flat, disappointing expectations for a 0.2% increase, and was 2.3% lower on a year-over-year basis.

A separate report showed that the U.K. trade deficit widened to GBP8.49 billion in May, a six month high, from a deficit of GBP8.43 billion in April. Economists had forecast a deficit of GBP8.47 billion.

The euro was slightly higher against the yen, with EUR/JPY easing up 0.10% to 130.03.

Finance ministers from the European Union were to hold talks in Brussels later Tuesday.