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The euro bulls are not willing to give up the fight despite today's soft Manufacturing PMI prints from France, Germany and the euro bloc. The numbers may make traders wonder about the real sustainability of the current risk rally. The euro has stood firmly against yesterday's sell off in risk associated assets, accelerating towards the end of the NA session on comments by Republican Party member John Boehner regarding the so-called 'fiscal cliff', whilst at the same time emphasizing the fact that little progress has been made - or talked about - with little more than 17 days for the deadline.

This time - a notable exception from previous gatherings - the EU leaders seem to be doing something else apart from talking, eating and going over the same rhetoric, as they have announced the next tranche of aid directed to Greece, while the central bank commanded by Mario Draghi has been appointed as supervisor of mostly the bigger banks within the euro zone, something that should be implemented at some point towards the end of 2013. The EU Summit will continue today, and although nobody knows the nature of future announcements or comments, a priori they appear to be far from hampering the sentiment surrounding the single currency.

… More challenges towards year-end

As sessions pass by, markets would be engulfed by the year-end lull on one side, and the omnipresent feeling of the Santa's rally on the other, which theoretically the markets have been experiencing a taste of the latter so far. So that leaves market participants with an ambiguous sensation about the next movements of EUR/USD, against a backdrop of absent relevant data or events scheduled throughout the rest of the year.

The 'fiscal cliff' back-and-forths and the eventual conclusion looks like being the main volatility provider in upcoming sessions, although at these moments, they only represent both Republicans and Democrats best wishes.

So, in these heights, the EUR/USD is feeling quite comfortable, and if nothing precipitates a sharp decline, it seems that a consolidation in the area around 1.3100 would likely follow, ahead of more significant hurdles in the vicinity of 1.3150 and beyond.

When comes to the technical area, Senior Technical Analyst Axel Rudolph at Commerzbank suggests the cross "surge higher again ran out of steam around the 1.3100 mark on Thursday. It and the three month resistance line at 1.3121, the 1.3127 current December high and the 1.3140 October peak are expected to provoke a sell-off back towards the psychological 1.3000 region. Failure here will probably kick start a slide back to the 1.2880/76 support area."

Source: Euro Bulls... Are You Ready?