The euro fell against the U.S. dollar on Tuesday, as ongoing sovereign debt crisis weighed on the single currency.

EUR/USD started tumbling during early European trading, with the pair dropping 0.86 percent to hit 1.4386.

“In EUR/USD 1.4550 is now set up as the near term resistance after Monday's stop loss run during the Asian session ran into resistance at this level. The 100dma at 1.4367 offers downside support,” RBC Capital Markets said in a note.

Italy returned to bond markets on Tuesday, auctioning EUR 7.7 billion of bonds, including 3.75bn of a new benchmark 10yr bond.

“Today also saw the return of Italy to bond markets, with its first auction after the summer break. The results showed disappointing demand and coincided with the last leg of the dip in EUR. With spreads widening post-auction, markets were waiting for the ECB to appear and offer support via the SMP – based on price action and market chatter that seems to have happened,” said the note.

The European Central Bank (ECB) President Jean-Claude Trichet said on Monday that eurozone’s growth could be weaker than expected in the coming months, signaling central bank may not hike interest rates in the near future.

“EURUSD will have great difficulties breaking out of range trading as it moves mostly as a function of a reduction in bearish positions rather than any improvement in Europe,” Societe Generale Cross Asset Research said in a note.

The single currency also traded lower against the British pound, with EUR/GBP hitting a three day low at 0.8816.

“The European debt crisis won't be resolved with yet another summit. The new European bail-out agreement on Greece from last July pushed European AAA countries CDS higher but failed to reassure markets,” Societe Generale said.