Euro falls in Asia

The euro hovered near a one-month high on Monday after a G20 summit boosted hopes that the EU would decisively address the region's debt woes this week, with traders saying additional short-covering may allow the currency to eke out further gains.
The euro, down 0.2 percent at $1.3853 on light profit-taking, rallied 3.5 percent last week after the leaders of Germany and France pledged to unveil a new package for solving the two-year crisis when the EU summit convenes on October 23, including an agreement on how to recapitalise banks.
Currency positioning by speculators in the week ended on October 11 also suggested traders were betting that the EU summit would hit some snags and the euro would drop. While it may now be closer to neutral than the data suggests, as the euro has gained 1.6 percent since it was compiled, traders say that not all short positions have been cleared yet. "The market is still euro-short and may get caught off guard quite easily. More aggressive short-covering can see the euro go another leg higher, particularly against the yen," said a trader for a Japanese bank.
But any potential gains would be hard-won as the euro faces a thick layer of resistance. An option barrier and topside stop losses have been detected at $1.3900, right above the level where the euro's rally stalled last week. Downside stops are also seen at $1.3800.
If it breaches $1.3900, the euro may be halted at $1.3937, resistance marked by a couple of daily highs hit in September, or at its 55-day moving average near $1.3952. Support for the common currency is seen around $1.3834, roughly matching a 38.2 percent retracement of a fall from around $1.4940 in May to a nine-month low of $1.3145 hit earlier in October.
Against the yen, the euro was also 0.2 percent lower at 106.88 yen, still not far from a five-week high of 107.45 yen hit on Friday and well off a 10-year low of 100.77 yen hit in early October. While attendees of the G20 summit said the pace of discussions was encouraging, policymakers are facing stiff resistance from banks over plans for greater private sector participation in Greek debt restructuring and moves to force banks to raise capital. The greenback was little changed at 77.18 yen after hitting 77.45 on Friday, near a one-month peak set on Wednesday. The dollar index held near a one-month low of 76.508 hit on Friday after slipping 2.6 percent last week. It last stood at 76.717.