Speculators in euro futures reduced its net long position in the week ended June 15, data from the Commodity Futures Trading Commission showed on Friday.
The data from the CFTC's Commitments of the traders report on speculative positioning are used by analysts as an indicator of future market direction.
For example, extreme net long speculative positions often signal a decline in the currency, especially if that position conflicts with the positioning of the more influential commercial players.
Speculators generally are trend followers seeking to pick a precise top or bottom in the market.
According to CFTC data, net long euro positions fell to 16,588 contracts, from the previous week's 23,474 contracts.
"Speculators have decided that the euro recovery in late May had pretty much ran its course," said Sean Callow, currency strategist at IDEAglobal in New York.
"In fact, there was a pretty big rally in the euro in May up to early June from about $1.18-$1.23. Speculators had pushed the euro higher, but also helped it come down," he added.
Speculators, on the other hand, increased net long Swiss franc positions to 16,745 contracts, from 16,262 the previous week. Short-term investors had accumulated long positions in the run-up to the Swiss National Bank's monetary policy meeting on Thursday.
The SNB had surprised the markets by raising interest rates by 25 basis points as the Swiss central bank sought to prevent inflation from creeping in amid its accelerating economy.
Canadian dollar net short positions, meanwhile, increased to 10,990 contracts, from the previous week's 4,892 contracts.
Comments from Bank of Canada Governor David Dodge saying the bank expects core inflation to stay below 2 percent year- on-year until the end of 2005, signalled that the BoC is in no rusk to rise rates.
"The Canadian dollar had a lot of speculative buying early in the year, but it seems to have fallen out of favour and speculators thought the rally was overdone. In addition, there seems to be no urgency for the Bank of Canada to raise rates.
"Canada is also facing the prospect that the Fed funds rate will be ratcheted right up to Canadian rates even before the BoC raises its interest rates," said Callow.