How will impact Greek problems on euro currencies

forex trading outlook today - How will impact Greek problems on euro currencies : The euro held at four-month lows against the dollar on Wednesday and may extend losses sustained so far this month after Greece said it will hold new elections, raising risks Athens could eventually exit the euro.

The prospect of prolonged political instability in the debt-ridden country is likely to keep the euro under severe pressure, analysts said.

The common currency, which has already lost 4 percent in May, was barely changed from late New York levels at $1.2734 , struggling to regain ground after sliding to a four-month low of $1.2722 the day before, according to EBS data.

"The market is very short euro, the currency seems oversold by any technical measure, and yet it keeps extending losses - this means that we may quickly approach the $1.25-$1.26 area," said Koji Fukaya, director of global foreign exchange research for Credit Suisse Securities in Tokyo.

"The Greek problems are obviously the main driver here, but even looking at economic fundamentals, the euro around $1.30 just seemed unnaturally expensive. I see this move as a return into a more neutral territory."

The single currency also looked feeble on the charts, having decisively fallen through an important support line at $1.2827, the 76.4 percent retracement of its rally earlier this year from $1.2624 to $1.3486.

Chartists said that a clear break of the level opened the way for a test of the January low of $1.2624, though traders were wary of bouts of short-covering which could send the euro temporarily higher as net shorts in the currency stand at three-month highs.

With the appetite for risk dampened, investors kept piling into assets deemed as safe, pushing the dollar index - a gauge of its performance against major currencies - to a four month high of 81.292.

Against the yen, the greenback rose to a two-week high of 80.36, pulling away from 2-1/2-month low of 79.428 yen hit last week, with major support seen at 79.14, a 61.8 percent retracement of its rally from February to March.

Traders said the pair may extend its rise, citing stop-loss bids around 80.45-50. They added, however, that Japanese exporters may cap any further advances with their offers lined up their around 81 yen.

Worries about slowing Chinese and global growth also weighed on higher-yielding currencies with the Australian dollar at $0.9933b, close to a five-month low of $0.9921 plumbed the day before.

The currency's chart outlook was bleak after it had breached a major support at $0.9945-50, the 61.8 pct retracement of its climb from October to February

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