The euro on Friday clung to gains eked out in volatile overnight trade but looked increasingly vulnerable as European leaders remained deeply divided ahead of a weekend summit on the region's debt crisis. The euro, last at $1.3786, has kept well off its nine-month low hit in early October, however, despite a widening in spreads on yields between safe-haven German Bunds and other European countries.
Traders said this meant investors were trying to keep positions close to neutral heading into the summit, on the off chance that the EU manages to come up with a credible plan to resolve the crisis, and added that selling pressure will likely re-emerge "the minute the summit is over".
As an example of such nervous positioning, they cited a move in the dollar and the euro, which both tumbled against the Swiss franc, with dollar/Swiss falling 1 percent at one point on stop-loss buying of the franc and its purchases made by a US name. "A significant divide remains (between) German and French politicians on the key issues of bondholder hair cuts, bank recapitalisation and particularly the structure of any EFSF expansion," said Simon Smollett, analyst at Credit Agricole. The euro may find support at $1.3700, with plenty of euro bids said to be lurking at levels between $1.3700 and $1.3650.
Below those levels, further support looms at the 100-week moving average at $1.3669 briefly breached on Thursday, $1.3650 at two daily lows hit earlier this week with Asian sovereign demand detected around the level, then $1.3621 - a 38.2 percent retracement of the euro's October rally, and eventually the spike low on September 12 of $1.3495.
Resistance on hourly charts lies roughly around $1.3840, a downward trendline drawn off Monday's one-month peak near $1.3914 and Wednesday's intraday high of $1.3870.
Against the yen, the common currency climbed to 105.86 yen from a low of 104.83. The dollar index dipped to 76.889 from 77.498. The greenback stood steady on the yen, last changing hands at 76.77. Stop loss buying pushed the dollar as low as around 0.8849 Swiss francs on trading platform EBS. After trimming some losses the dollar was down 0.6 percent at 0.8891. The euro slid 0.5 percent versus the Swiss franc to 1.2270. The drop in dollar/Swiss and euro/Swiss seemed to gain momentum after they dropped below the previous day's intraday lows.