The euro fell from a one-month high against the dollar on Monday after a German official said this weekend's European Union summit would not provide a definitive solution to the region's debt crisis.
German Finance Minister Wolfgang Schaeuble said European governments will not present an ultimate plan at the October 23 summit. Expectations of the meeting had grown since German and French leaders promised earlier this month to unveil a comprehensive euro zone crisis package.
The euro could see volatile trading this week, but any weakness would likely be limited. While uncertainty remains, European policymakers have appeared closer to reaching an agreement to take aggressive steps to ring-fence the debt crisis, analysts said.
We are actually looking for euro/dollar to be at $1.45 by the end of this year, said Mary Nicola, currency strategist at BNP Paribas in New York. We do expect a positive outcome and we do expect what's happening with Greece to settle down. Basically, we expect a long-term comprehensive solution.
The euro fell 0.8 percent at $1.3762, having risen to $1.39148 on trading platform EBS, its highest since September 15. It dropped 1.4 percent to 105.64 yen.
Traders said offers ahead of $1.3930 halted the euro's advance toward the pivotal $1.40 level. Resistance was at $1.3937, which marked a couple of daily highs in September.
Further upside targets include $1.3950, around the 55-day moving average, and $1.4076, the 200-day moving average.
Germany's Schaeuble also repeated at the weekend that private bondholders would have to accept steeper voluntary write-downs on their Greek holdings than the 21 percent agreed last July.
A lead negotiator for the banks said this could only happen if policymakers addressed the full range of sovereign debt issues in Europe. Charles Dallara of the Institute of International Finance declined comment on reports that the private sector might have to take a 50 percent loss.
Camilla Sutton, senior currency strategist at Scotia Capital in Toronto, said with euro shorts still outnumbering the longs by a significant ratio, any further increase in risk appetite could be met with an exaggerated currency response.
Data from the Commodity Futures Trading Commission on Friday showed speculators cut their net short euro position to 73,795 contracts from 82,697 the previous week, reflecting rising optimism about the euro zone.
The euro's 3.5 percent rally last week, which marked its largest in nine months, likely further reduced those shorts.
I do still believe that the momentum is very much in favor of the euro and of risk in general, said Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut. I think any euro weakness should be met with buying or adding to longs.
Currency investors will also closely watch the equity market for direction, analysts said. Earnings from U.S. companies including Goldman Sachs and Apple could affect the euro's performance, which has closely tracked investors' appetite for stocks and other risky assets.
Against a basket of currencies, the dollar index fell to a one-month low of 76.441 before recovering to 77.002, up 0.5 percent on the day. Against the yen, the dollar slipped 0.5 percent to 76.78.