The euro has been hit hard overnight and in early Friday morning New York currency trade following news that the European Union members reached a deal to help prevent future debt problems in the region.

Even with the deal, the euro fell from a high of $1.3361 in overnight European trade to a current low of $1.3214.

The euro decline was sparked by additional news that Moody’s Investors Service lowered its bond rating on the Ireland government by five levels and declared a weak economic outlook for the country.

While continued debt worries hamper the euro, the dollar received a boost when Congress approved an $850 billion tax package that effectively retains the Bush-era tax cuts.

The Obama Administration had previously opposed many elements of the Bush tax cuts that Democrats felt were too generous for the wealthy. However, the extension of the cuts demonstrates the realization that tax incentives are still vital to strengthening the economy.

The dollar has benefitted early following the news. Along with making gains against the weakening euro, the greenback has made gains against the British pound, which is now worth just $1.5510. Additionally, a dollar currently nets 84.10 yen.

The euro has been hovering in the low $1.30s for several weeks as currency speculators try to determine what moves to make for the long-term. In the short-term, recent US economic data is inspiring investors more than the EU’s resolution to prevent future debt.

Technical analysts are pointing to a short-term 14.6 per cent Fibonacci retracement as support for the euro-dollar at $1.3361.

Another major support level comes into play just below $1.30. A significant move below that in the coming days or weeks could spell trouble for the euro in the near-term.

Ultimately, the reality of economic direction for the United States and EU regions will dictate the longer-term direction for the euro and dollar. For Friday, the US tax breaks have bolstered the dollar’s position while credit concerns weigh on the euro.