FOREX-Euro falls from 2-mth high as Greek outcome awaited

* Euro resistance seen near 100-day moving average around
$1.3333
* Italy's economy likely shrank in Q4 - source
* Commodity currencies surrender gains

By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 8 (Reuters) - The euro slid from a
two-month high versus the U.S. dollar in choppy trading on
Wednesday as the outcome of a meeting of Greek political
leaders on the country's second bailout package remained up in
the air, although investors were optimistic overall that a deal
will be completed.
Europe's common currency shuttled between gains and losses
in a market that has become mainly driven by headlines out of
Europe, much like what happened late last year.
Partly weighing on the euro was news Italy's economy likely
contracted in the fourth quarter. A government source told
Reuters Italy's gross domestic product may have fallen in the
fourth quarter of last year, probably more steeply than the 0.2
percent decline posted in the third.
Italy's news highlighted how precarious the European debt
situation has become. Even though Greece may be close to an
agreement on a rescue package, the bailout doesn't address the
region's fiscal and banking woes.
"There seems to be progress on Greece, but there is no
definitive outcome so people are hesitant to push the euro
higher," said John Doyle, director of markets at Tempus
Consulting in Washington.
He added that there were sellers of the euro between
$1.3250-$1.3275.
Following delays in negotiations, Greek leaders met on
Wednesday in a bid to agree on yet deeper austerity in return
for another international rescue package.
The euro rose to $1.32890, its highest level since
Dec. 12, on trading platfrom EBS, but fell to session lows of
$1.32210 around midday. It was last at $1.32286, down 0.3
percent.
The intra-day bias on the euro, however, remained positive,
with resistance at the 100-day moving average around $1.33339,
while option-related offers were reported ahead of $1.3300.
Technical startegists also said the rebound from the January
low of $1.26260 has just resumed and market participants should
now be targeting $1.34324, the 50 percent Fibonacci retracement
of the move from the late October high of $1.42480 to that
mid-January trough.
On the downside, a break of the $1.30260 support -- the
February 1 low -- is needed to signal the completion of the
current uptrend. Otherwise, analysts said the near-term outlook
will remain mildly bullish even in case of a pullback.
A Greek agreement, however should offer only a short-term
boost to the euro.
Morgan Stanley strategists, for one, said they established
a short euro position at $1.3250 targeting $1.2390 with a stop
at $1.3350, given the structural problems still facing the euro
zone even if Greece gets a second bailout. They believed that
the Greek deal has been largely priced into the euro/dollar
pair.
Jens Nordvig, head of global FX strategy at Nomura
Securities, echoed the same sentiment. He thinks that $1.25 is a
"more reasonable target" for the first quarter but he would not
be surprised to see a squeeze higher in the very short term
given the still very elevated speculative short positioning in
euro/dollar.
The latest positioning data showed currency speculators
trimmed euro short positions to 157,546 contracts, down from a
record 171,347 the previous week.
Euro/dollar risk-reversals, meanwhile, showed that demand to
hedge against a fall in the currency weakened further, with the
one-month 25-delta at -1.858 vols in favour of euro puts versus
-2.05 at the beginning of the week.

EURO/YEN LOWER, COMMODITY FX REVERSES GAINS
The euro also hit a seven-week peak of 102.449
against the yen, on reported stop-loss buying. It later fell 0.2
percent 101.660 yen, but traders said the outlook was positive
while above support around 101.46, the base of the closely
watched Japanese Ichimoku cloud indicator.
The dollar was slightly higher against the yen at 76.860
yen, retreating from peaks above 77 yen as traders said model
accounts sold from the highs.
Earlier on Wednesday, the yen showed little reaction to data
showing Japan's current account surplus shrank sharply to a
15-year low in 2011.
The Australian dollar, meanwhile, reversed gains after
earlier hitting a six-month high of US$1.0845. The Aussie was
last down 0.3 percent at US$1.0768. The New Zealand dollar also
traded 0.3 percent lower at US$0.8332. Earlier, it rose to a
five-month high US$1.8407.