TOKYO: The euro hovered above a two-month low on Thursday, having halted a five-day losing streak the previous day on profit-taking, helped by minutes from the US Federal Reserve supporting more bond buying next year.
The euro has decoupled from other risk currencies, which were hit by fears that political gridlock could push the US over its "fiscal cliff" and by an upsurge of violence in the Middle East.
The yen showed signs of stabilising after suffering its biggest losses against the dollar and the euro in two months on Wednesday after Japanese Prime Minister Yoshihiko Noda indicated he will call a snap election next month.
The euro traded at $1.2730, having rebounded from Tuesday's two-month low of $1.2661, where it found some technical support, including its 90-day average and the Ichimoku cloud bottom.
The euro had almost constantly declined since it peaked above $1.31 in mid-October, shedding 3.6 percent.
On the candlestick chart, however, the euro had a doji pattern on Tuesday, which could be seen as a bullish reversal sign after a bear trend because the pattern often appears when the market is indecisive about extending a trend.
"The euro/dollar's trading volume had been falling until Monday, suggesting investors' willingness to sell the euro had been declining. And then trade volume rose on Tuesday when a doji pattern appeared, suggesting that investors are turning eager to take profits in euro selling," Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo, said in research note.
One possible resistance lies at the Ichimoku tenkan line at $1.2769, while levels around $1.2800-10 could set stronger resistance, hosting the Oct. 1 low as well as the 200-day average.
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