* Euro near 2-month highs, little changed at $1.2709 <EUR=>
* Strong U.S. earnings underpin stocks
* German, Italian, Portuguese auctions go smoothly
(Adds quotes, updates prices)
By Naomi Tajitsu
LONDON, July 14 (Reuters) - The euro held near a two-month
high against the dollar on Wednesday, supported by strong U.S.
corporate earnings and easing concerns about euro zone sovereign
debt after three countries in the bloc sold bonds.
Traders said funds were increasingly moving out of cash and
low-yielding U.S. Treasuries to buy the euro and growth-related
currencies as S&P futures <SPv1><.SPX> rose after earnings from
Intel Corp <INTC.O> beat expectations on Tuesday.
Investors were encouraged after smooth auctions of German
and Portuguese bonds, following a successful sale of Greek
government paper on Tuesday. [].
"Investors are breathing a sigh of relief for now as the Q2
earnings season has begun well and euro zone peripheral problems
appear more stable," said UBS currency strategist Geoffrey Yu.
Analysts said a German offer of five-year notes went
smoothly, while Portugal managed to sell more than it had been
expected in two- and seven-year bonds, albeit at higher yields.
Demand at Italian auctions was mixed. []
While the results had little impact on the euro, the single
currency held gains, having recovered losses suffered after
Moody's downgraded Portugal's sovereign rating on Tuesday.
By 1136 GMT, the euro <EUR=> eased slightly from late U.S.
trade on Tuesday to $1.2709, but was not far from a two-month
peak of $1.2739 <EUR=> hit the previous day.
Movements could be limited by options with a strike price of
$1.2700 set to expire later in the day, analysts said.
The next target for euro/dollar was the $1.30 area, in a
head-and-shoulders configuration starting from the low below
$1.20 struck last month, said Roberto Mialich, currency
strategist at Unicredit in Milan.
Others said the next target was at $1.2780, the 50 percent
retracement of the euro's fall from mid-April to the June low.
Data showing slower euro zone inflation, as expected, and a
slightly lower-than-expected reading in industrial production
[] had little impact on the market.
The euro hit a three-week high of 113.29 yen <EURJPY=R>
before paring gains to trade around 112.50 yen.
LOSING MOMENTUM?
The dollar <JPY=> was little changed at 88.61 yen. Options
with strike prices of 88.50 yen and 89.00 yen were set to
expire, which may limit movements, traders said.
The dollar index <.DXY> was down slightly at 83.56, having
broken below the trendline linking the November and April lows.
New support was seen around 83.15, the 38.2 percent retracement
of the index's November to June rally.
The euro was caught in narrow ranges, and some analysts said
this month's rally was petering out as investors awaited more
signs of an improving global economy.
"The euro has lost momentum, and its upside requires another
push higher in equities," said Adam Cole, global head of
currencies at RBC.
"It has benefited the most from risk demand, so further
gains will require more positive U.S. earnings surprises."
European shares <> slipped 0.3 percent following a
six-day winning streak, while S&P futures pointed to a higher
opening on Wall Street later in the day.
The market awaits minutes from the U.S. Federal Reserve's
June 22-23 policy meeting, due at 1800 GMT, with speculation
policymakers may have discussed further easing measures.
U.S. June retail sales, due at 1230 GMT, will also be in
focus with the market expecting sales fell 0.2 percent.
(Additional reporting by Tamawa Desai, editing by Nigel
Stephenson)
