Investing.com - The U.S. dollar reversed earlier losses against the euro on Wednesday as the risk-on rally stemming from the U.S. fiscal cliff deal waned when investors looked towards the upcoming debates on Washington's debt ceiling.
In U.S. trading on Wednesday, EUR/USD was trading down 0.19% at 1.3169, up from a session low of 1.3157, and off from a high of 1.3299.
The pair was likely to find support at 1.3144, the low from Dec. 17, and resistance at 1.3308, the high from Dec. 19.
The U.S. House of Representatives voted in favor of tax and spending reforms needed to avoid the fiscal cliff late Tuesday, sparing the U.S. of a possible recession that would have resulted from sweeping tax hikes and deep spending cuts taking affect at the same time.
The deal kept tax breaks in place for household incomes beneath USD450,000, however, the rally was short lived, as lawmakers must now debate raising the U.S. government's USD16.4 trillion debt ceiling likely sometime around February.
The Treasury can delay defaulting temporarily via taking extraordinary measures though lawmakers will eventually vote to lift it.
In 2011, Congress waited until the last minute to raise the debt ceiling, narrowly avoiding default although Standard & Poor's stripped the U.S. of its coveted triple-A rating, which turned investors away from risk on Wednesday.
Elsewhere, manufacturing activity in the U.S. grew at a faster rate in December than analysts had predicted.
The Institute for Supply Management said its index of purchasing managers rose to 50.7 in December, up from 49.5 in November and beating expectations for a 50.3 reading.
The euro, meanwhile, was down against the pound and up against the yen, with EUR/GBP trading down 0.14% at 0.8109, and EUR/JPY trading up 0.14% at 114.65.
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