Euro dips in Asia

The euro dipped on Friday but hovered above an intraday low hit after S&P cut Spain's credit rating, and was on track for its biggest weekly rally since January after getting lifted by a flurry of short-covering. The euro slipped 0.1 percent to $1.3770, having trimmed its losses after dipping to as low as $1.3723 following S&P's downgrade of Spain's credit rating to AA-minus. The move mirrored last week's downgrade of Spain by Fitch.
S&P's downgrade of Spain came shortly after Fitch on Thursday cut the ratings of UBS AG and placed several other European banks on credit watch negative. The euro, however, was still up 2.8 percent this week, a gain that if maintained through Friday would mark the strongest weekly performance since mid-January. "The euro has had a pretty good run in the past week. It started to run into key resistance levels and markets are building a fair amount of expectations around the October 23 (EU) Summit," said Greg Gibbs, strategist at RBS. The euro and risky assets such as equities have bounced this week as investors pared their overly bearish bets.
The short-covering rally came after the leaders of Germany and France pledged to unveil a new comprehensive package for solving the eurozone's debt crisis by the end of the month, including an agreement on how to recapitalise banks. Euro resistance is seen at this week's one-month peak of $1.3834 on trading platform EBS, a level that roughly matches a 38.2 percent retracement of a fall from around $1.4940 in May to a nine-month low of $1.3145 hit last week.
More resistance lies at $1.3937, a couple of daily highs hit in September, as well as near $1.3957, the euro's 55-day moving average. Support on hourly charts lies roughly in the $1.3700 to $1.3690 area. While the euro may claw above $1.39 by the end of the month, overall, the single currency seems poised to take a breather after its recent rally, said a trader for a major Japanese bank in Tokyo. The dollar held steady against the yen at 76.89, having backed down from a one-month high around 77.48 yen struck this week.