Euro hits two-month low in Asia

The euro plumbed two-month lows in Asia on Tuesday while the Australian dollar sank closer to parity as rising disappointment over the European Union's summit prompted investors to position for possible downgrades of eurozone sovereign credit ratings.
Rating agencies warned on Monday that last week's EU summit, viewed by some as a last chance to save the euro, did not go far enough in easing immediate concerns about the region's debt markets. The euro fell as low as $1.3160, but climbed as far as $1.3206, in the Asian afternoon on shortcovering before steadying at $1.3192. Net euro short positions totalled 95,814 contracts in the week through December 6, according to Commodity Futures Trading Commission data, and market participants said shorts likely increased in the wake of the disappointing summit.
The single currency could therefore continue to get the kind of short-term support it got on Tuesday, whenever investors take profits on or cover those positions. A break below October 4's nadir of $1.3145 would take the euro back to depths not seen since mid-January.
A daily close below $1.3150 would add to bearish price momentum and expose $1.3050 as the next downside target, according to George Davis, chief technical analyst at RBC Dominion Securities. That level would be a 61.8 percent Fibonacci retracement of the June 2010-May 2011 advance.
Pressure on the euro and heightened risk aversion increased the greenback's safe-haven appeal and helped lift the dollar index to 79.651, its highest this month, before it eased back to 79.476. The dollar index was above its weekly Ichimoku cloud top for the first time since September 2010. The greenabck also edged up against the yen, rising as high as 77.97 at one stage before trading around 77.86.
The fall in risk appetite hurt commodity currencies, which suffered steep declines. The Australian dollar shed more than 1 cent to a two-week low of $1.0030, before recovering as high as $1.0096, breaking through resistance at the base of its daily Ichimoku cloud at $1.0077 and approaching its 55-day moving average at $1.0120. The Aussie was last trading around $1.0083. Support now lies at its 21-day moving average of $1.0047 and then at parity, followed by $0.9942, which would represent a 61.8 percent retracement of its November-December climb.