On Friday, the dollar strengthened on safe-haven demand amid jitters regarding the US fiscal cliff talks, but as US leaders seem open to a deal risk appetite improved during the American afternoon.
At time of writing, EUR/USD is quoting at the 1.2725 area, just below its 100-hour SMA and only 20 pips above its weekly opening price, having bounced form a daily low of 1.2690.
Meanwhile in Europe, nothing was resolved this week and focus now shifts to the upcoming Eurogroup meeting next Tuesday.
"Considering that the single currency managed to move higher yesterday in the aftermath of the confirmation that it is in an official recession, we are clearly in an environment where fundamentals have taken a back seat", the TD Securities team commented. "For EUR/USD the downside level to watch is Tuesday's low of 1.2662, while the key topside level is marked by the 200-day MA near 1.2810".