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The euro extended gains versus the dollar on Friday, underpinned by the positive tone among financial markets, with investor focus on the Black Friday where US consumers were expected to take part in the biggest shopping day of the year.

European markets extended their weekly gains and US indexes opened positively a shortened session, as fiscal cliff concerns seem an old memory now and investors are immune to eurozone problems.

EU leaders are struggling to reach agreement on a new seven-year budget for the region, while new reports indicate that eurozone finance ministers will hold a teleconference on Saturday ahead of their meeting on Monday, in order to speed the process of finding a financing solution for Greece.

"While we wouldn't want to understate the challenges of reaching agreement on Greece, news reports have described some of the remaining obstacles as technical and legal, and thus the hurdles to a deal do not seem insurmountable," comments the Wells Fargo team. "With the odds still favoring further financing for Greece soon, our bias remains for gains in most foreign currencies over the near-term."

Euro reaches 3-week high, 1.3000 is next

The euro took a step higher on Friday, breaking above the 1.2900/20 resistance area to hit a 3-week high of 1.2968, with no clear catalyst but the risk-on mood, which continues to be pointed as the main driver. EUR/USD was last up 0.6% at the 1.2960 zone.

A close above 1.2940 would be a positive signal and will pave the way towards 1.3000 with the 1.3170 level (September's double-top) at sight. On the other hand, the 1.2900 level should hold dips in order to keep bears restrained.

"While this week's fundamental gains for Europe have been a small help to the recent uptrend, the gains appear minor in the context of still deteriorating conditions in the Eurozone as a whole," says the TD Securities team. "Nevertheless we continue to look at a technical perspective on the EUR that is improving on the short and long term charts."

On a wider view, Danske Bank analysts comment that they still look for EUR/USD to move higher in 2013 as the euro is much less vulnerable to negative news flow than it was before the ECB announcement of the OMT. However, they agree with market consensus that near-term risks remain to the downside from the US fiscal cliff.

Source: Euro Rallies Despite European News