Risk aversion is the theme of the day in financial markets, with stocks, commodities and risky currencies under pressure as with the Greek deal out of the way investors have shifted their attention back to the U.S. fiscal cliff and the lack of progress on that front.
The US dollar is broadly stronger against this backdrop, with EUR/USD testing levels below 1.2900, while stocks lost ground in Europe and Wall Street. Weak economic data on both sides of the Atlantic also weighed on the euro after the single currency briefly hit a 1-month high above 1.3000 on Tuesday.
"Between lingering Greek uncertainties and the fast-approaching fiscal cliff, investors have taken on a more cautious tone this week, and 'risk' assets have continued to be better sold", says the TD Securities team.
Looking ahead, the Beige Book will be published at 19:00 GMT.
Euro retreats, 1.2880 key support
The euro fell to a low of 1.2879 but managed to recover some ground afterwards and continues to waver in a neutral zone between 1.2900 and 1.3000. A confirmation through either these levels could set a clearer direction for the short-term. EUR/USD was last 0.1% down at the 1.2920 zone.
"The Greek deal roughly coincided with the near term top for the EUR (just above 1.30) and yesterday's price action was rather bearish technically (an outside range day)", TD Securities analysts said. "A clean break of 1.2900 (through 1.2880) should open up to a deeper slide toward 1.2800 (200-day moving average). With longer term signals still pointing higher, however, this move may prove to be just a partial retracement of the recent rally".