The euro eased on Monday, pulling away from a key chart resistance as uncertainty over how Greece's debt crisis will be tackled kept investors on edge, while the dollar stabilised following a slide late last week. With volumes low due to holidays in the UK and the United States, analysts expected the euro to stay below its 55-day moving average of $1.4325.
The single currency, which was last down 0.4 percent at $1.4263, also faces resistance near $1.4369, the top of the cloud on the daily Ichimoku chart, a technical analysis tool popular among traders. Stops are said to be lurking above $1.4350 with light bids seen below $1.42, traders said.
"The market is a bit hesitant about picking up the euro and taking it past the mid-May highs of $1.4345 given uncertainty about whether Greece will receive its next (aid) tranche from the IMF/EU and whether it can fulfill all the requirements," said Niels Christensen, FX strategist at Nordea.
Greek government bond yields rose and spreads over German Bunds widened after European Central Bank board member Lorenzo Bini Smaghi warned of the dangers if Greece were to default on its debt. He told the Financial Times it was a "fairytale" to think that Greece's debts could be restructured in an orderly way. Over the weekend German weekly magazine Der Spiegel fanned fears that Greece might not receive the next tranche of its EU/IMF bailout, saying Athens might have missed all fiscal targets set by its lenders.
Greece and the IMF denied the report and EU officials said they were working on a second bailout package that will avert a potential Greek default. European Union and IMF officials are expected to deliver their progress report on Greece's debt sustainability probably late this week. As that will signal whether Athens gets the next tranche of its bailout, euro bulls are likely to stay on the sidelines given the uncertainty. If Greece fails to get funds, it faces the possibility of default over the summer.
Latest data from the US Commodity Futures Trading Commission showed speculators drastically reduced net long positions in the euro in the week to May 24. Earlier on Monday, the dollar hit a record low against the Swiss franc of 0.8457 francs on trading platform EBS and dipped to a 26-year trough versus the New Zealand dollar. The dollar index was flat at 74.997, not far from a two-week low of 74.752.
"Data in the US is showing growth is losing momentum and that has supported speculation of another round of quantitative easing," said Manuel Oliveri, currency strategist at UBS. "For the dollar to turn around there has to be a change in interest rate expectations in the US That's unlikely in the near term."
The two-year US Treasury yield dipped to as low as 0.48 percent on Friday, the lowest since early December. Data in the US picks up this week, with the May jobs report on Friday the highlight. The dollar was steady against the Japanese yen at 80.87 yen, but has retreated since hitting a three-week peak of 82.23 yen earlier in May. The Canadian dollar was little changed against the US currency as Canadian first-quarter growth data offered few surprises. The US dollar was last up 0.2 percent at C$0.9775, recovering from a low of C$0.9752.
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