* Bank stress tests eyed in Europe
* Charts suggest possible rise in euro to $1.28 near term
(Updates prices, adds details)
By Nick Olivari
NEW YORK, July 7 (Reuters) - The euro rose to a seven-week
high against the dollar on Wednesday in technical trading after
the breach of a key resistance level prompted some investors
who had bet against the single currency to buy to prevent
losses.
Concerns about the growth outlook for the global economy
and plans to test the financial health of European banks had
weighed on the euro for most of the session.
European regulators on Wednesday haggled over what details
to reveal from stress tests of about 100 banks, in a dispute
that could undermine confidence in the health checks on the
region's lenders. For more details see []
But the euro/dollar broke through technical resistance
around 1.2610, said Kathy Lien, director of research at GFT
Forex in New York.
"When it broke through that, it broke higher and from this
position there is no major resistance until 1.2676, the May
high," Lien said.
Last week's data on euro/dollar short positions also
indicated there was only a small decline in euro short
positions, Lien said, which means there was still a lot of
opportunity for a short squeeze in the euro/dollar.
Investors who bet against a currency are often forced to
turn around and buy to prevent losses if the currency actually
gains.
The euro was last at $1.2636, up 0.1 percent on the day
<EUR=>, even after data showed factory orders in Germany, the
euro zone's largest economy, fell in May, marking the first
decline this year. []
The euro rose to $1.2665 on trading platform EBS on
Wednesday, its highest level in about seven weeks. The high
according to Reuters data was $1.2664.
The euro gained support earlier this week after a solid
Spanish syndicated debt sale on Tuesday eased euro zone debt
fears and weak U.S. data hit the dollar.
Analysts said the single currency could rise further in the
short term as a recent raft of weak U.S. data prompts investors
to unwind long dollar positions and short euro positions built
up since the start of the year.
German Chancellor Angela Merkel said on Wednesday the euro
has stabilized and should be on a stronger foundation than
before the Greek crisis thanks to debt-reduction measures being
implemented in the euro zone. [].
Still, most analysts in a Reuters poll believe the euro
will stay weak against the dollar over the coming year. The
survey of about 60 analysts, taken July 2-7, predicted the euro
would fall to $1.24 in one month and $1.20 in three months,
then to $1.18 in six months and in mid-2011.[]
"The euro remains vulnerable to another downturn as
investors begin to look to the 16-member bloc's growth
prospects amid a backdrop of strict budget cuts and the
potential for another downturn in the global economy," said
Omer Esiner, a chief market analyst at Commonwealth Foreign
Exchange in Washington, D.C.
The dollar rose 0.2 percent to 87.74 yen <JPY=> in late New
York trading, close to the session high of 87.77 but still not
far from a seven-month low of 86.96 yen hit on EBS last week
<JPY=EBS>.
(Additional reporting by Vivianne Rodrigues; Editing by Leslie
Adler)
