By: Barbara Zigah

The Euro had earlier continued to grind higher against the U.S. Dollar, but is now taking a breather in Asian trading while hovering close to a 2-week high. It is finding support from short-covering following yesterday’s successful sovereign debt auctions by France and Spain.

As reported at 11:59 a.m. (JST) in Tokyo the Euro had traded at $1.2959, retreating 0.1% from the session high of $1.2973; the Euro is now at the highest level in two weeks, and has gained 2.8% since hitting $1.2624 last week, a 17-month low. Some investors believe that a break through resistance at $1.3000 is critical, while others say that it would need to break through $1.3145 to suggest that an interim base had formed.

The common currency had also edged higher against the Japanese Yen, but also has eased slightly back. The Euro was trading down 0.1% to 99.90 Japanese Yen, off the 2-week high of 100.05 Japanese Yen which was struck yesterday, a 3.1% gain from the decade-long low struck earlier in the week.

The markets will watch the outcome of the Greek government’s negotiations with private bondholders. Analysts say that a break-down of the talks for a proposed debt swap do post an event risk to the common currency, but with positive news some traders could consider cutting their bearish positions.