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The euro-bulls' stampede was well contained by the strong resistance in the vicinity of 1.3300 after the U.S. economy has averted the so-called 'fiscal cliff'. The subsequent exponential increase in the risk appetite was directed to the single currency first hand, although its direction changed soon after the opening bell in London, where stocks and other risk associated assets took the relay, exposing the euro's lack of solid arguments for prolonging the upside to levels beyond 1.33. This trend has been accentuated after poor manufacturing PMI prints in the core members of the bloc.

… There are no blind people, only blindness

The huge wave of risk appetite seems to bury everything that stands up on its march, it possesses the ability to make traders forget about the reality that the eurozone, for instance, is now living with-- and even worse, what lies ahead. Camilla Sutton, Chief Currency Strategist at Scotiabank, expects the euro to decline to 1.27 towards the last quarter of 2013. Of course, a million things could and will happen until that period arrives, but at least there is a hint of truth. The euro, per se, lacks the arguments and the solidness to sustain a firm ascent towards recent highs, let alone to attempt to reach levels even close to the 2011 highs.

Therefore, EUR/USD would look to the other side of the coin when looking for catalysts or excuses to justify occasional upsides: the U.S. dollar. However, the greenback is expected to strengthen this year, starting with discussions about postponed spending cuts and the debt ceiling within the next six to eight weeks, and all against the backdrop of a firm recovery in the U.S. economy, which would be supportive of a stronger greenback.

When it comes to technical analysis, Karen Jones at Commerzbank believes the cross has reached some sort of small top in the short term, indicative of a further pullback towards the key area around 1.3000. "Ahead of here lies 1.3061 (38.2% retracement) and the 1.3019 2 month support line. To confirm that the market has topped here we will need a close below the 1.2930 2012-2013 uptrend. We note the divergence of the weekly RSI and this does suggest caution in the up move".

… NFP on the horizon

Today's weekly report on the U.S. labor market and the ADP Employment Changed will be closely watched by investors, ahead of the FOMC minutes due in the European evening and more relevant, the Non farm Payrolls due tomorrow, where a better-than-expected reading might add extra selling pressure to the cross.

Source: Euro Bulls... Are You Still Out There?