Euro licks wounds in Asia

The euro nursed hefty losses in Asia on Friday ahead of an all-important EU summit, after the European Central Bank poured cold water on hopes it will buy up more bonds of debt-laden eurozone states, a step some deem essential to containing the debt crisis.
The euro wallowed at $1.3343, having dipped around 1 percent to as low as $1.3289 overnight. Players expected cautious trading on Friday, with investors awaiting the EU summit unlikely to sell at these levels. While the ECB's stance exerts even more pressure on the European leaders to come up with a credible plan at the meeting, early signs did not bode well for the euro bulls. Market watchers lowered their hopes for the event to deliver even after an EU official said that EU leaders agreed on new fiscal rules enshrining tougher budget discipline.
"The outlook for the euro versus major currencies remains bearish," said Nomura Securities analysts Jens Nordvig. "The main drivers are a continued lack of a convincing policy response to the debt crisis, pronounced eurozone growth underperformance, and an ongoing global asset allocation shift away from eurozone assets," Nordvig said, adding that the brokerage's year-end target of $1.30 was still valid.
In a sign that the market was cautiously bracing itself for a yet another disappointment after the EU meeting, the 25 delta one-month risk reversals for euro/dollar traded around -3.10 vols with a bias for euro puts, compared with -2.75 vols spotted earlier in the week.
In this situation, traders pondered support levels for the common currency, seen at $1.3213 and $1.3145 - November and October lows respectively. Commodity currencies were also licking their wounds, with the Australian dollar at $1.0166, having shed more than 2 percent from the high of $1.0382 on Thursday. Some support is seen at $1.0077 - the daily Ichimoku cloud base. The softer euro pushes the dollar index to a one-week high above 79. Against the yen, the dollar continues to hover within the well-trodden range and last fetches 77.67 yen.