The euro held steady against the dollar on Friday as a short-covering bounce stalled on lingering uncertainty about the fate of Greece's austerity plan, with signs of money market strains also seen as a potential downside risk for the single currency. The euro bounced off the previous day's low following news that Greece had reached a deal with international lenders on an austerity plan that would bring it one step closer to securing much-needed financial aid.
But the euro later lost steam, with the single currency last standing at $1.4255, little changed from late US trading on Thursday, its earlier bounce having stalled just below resistance near $1.4286. That coincides with the conversion line on the daily Ichimoku chart, a popular technical analysis tool, and the euro faces more resistance at the base line, which now lies near $1.4332.
"Part of the reason the euro's bounce was so fast (on Thursday) was probably because there was some position unwinding ahead of the weekend," says Tsutomu Soma, senior manager for Okasan Securities' foreign securities department in Tokyo. The euro held steady against the Swiss franc at 1.1954, staying above a record low of 1.18470 struck on Thursday on trading platform EBS.
Recent signs of dollar funding strains may also weigh on the euro against the dollar, with investors watching to see whether European banks' dollar funding demand will increase in currency forwards and cross-currency basis swaps. The dollar index last stood at 75.291, hovering close to the trendline resistance that lay right around 75.64. Sterling, which slumped to a three-month lows around $1.5938 on Thursday, held steady on the day at $1.6015. The dollar held steady against the yen at 80.50 yen. A trader at a Japanese brokerage said strong bids were supporting the dollar at levels below 80.50 yen.
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