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The euro fell to a fresh 2-month low beneath 1.2700 against the dollar on Friday amid mounting concerns over the eurozone debt crisis and the global economic growth. Even though the European session was marked by a strong sense of risk aversion, U.S. stocks turned higher and the shared currency managed to trim losses after upbeat U.S. consumer confidence and wholesales data.

"Worries that EU leaders will not be able to come to a consensus on the next Greek aid tranche by early next week mean that the EUR, and European currencies generally, are underperforming", says the TD Securities team. "Greece's bill redemption at the end of next week make those concerns more acute, and it is now looking more likely that they will need a temporary fix before the full tranche is paid".

Euro remains under pressure, further losses likely

The euro has made a fresh 2-month low of 1.2689 at the beginning of the American session before recovering slightly to currently trade slightly above 1.2700, where it records a 0.2% daily loss.

The technical picture continues to look pretty bearish, as EUR/USD pierced the 1.2700 psychological level and keeps printing lower lows on daily basis. On the downside, a confirmation below there, could trigger a quick move toward the 1.2650 zone. At this point, the upside seems limited, and only a recovery above the 200-day SMA (1.2820) could provide relief to the cross.

In this regard, the BBH analyst team notes that the euro made a marginal new low for this cycle and the break below 1.2760 yesterday signals further euro losses that targets the September 5 low near 1.2500.

Fundamentally speaking, Danske Bank analysts argue that the U.S. fiscal cliff and the postponement of the new Greek rescue plan are both factors that currently weigh on EUR/USD. Analysts at Danske continue to see risks skewed to the downside in the short term, especially after the horrible industrial production data from France released this morning, which mirrors the equally bad German production data released earlier this week, and indicates that economic activity in Europe currently is declining at a rapid pace.

Source: Euro Dips Below 1.2700, Risks Skewed To The Downside