Europe’s common currency slipped after the auction yield on new 10-year Italian government debt hit a new euro lifetime high. It was the first euro zone bond supply since European leaders struck a deal on anti-crisis measures this week.

The European deal struck on Wednesday included an agreement that private banks and insurers accept 50 percent losses on their Greek debt holdings, a leveraging of the euro zone bailout fund, and recapitalization of banks.

Analysts said the euro remains vulnerable as the euro zone still needs to find the money to expand its bailout fund, the European Financial Stability Facility. Doubts linger as to whether the fund’s increased size of around 1 trillion euros ($1.4 trillion) would be enough to staunch the crisis.

“There are some good things about the package, but most of these things have been relatively well-flagged,” said Ken Dickson, investment director for currencies at Standard Life and Investments in Edinburgh, Scotland, which has assets under management of about $252 billion.

“Most of what the package is doing is trying to sort out the symptoms of the problem that we see in Europe. But the underlying problems of high funding costs in countries with low nominal growth rates, combined with pretty high levels of debt, make the situation still quite difficult for the euroland.”

In early afternoon trading, the euro was last down 0.2 percent at $1.41635. It gained 2.1 percent on Thursday, around the entire weekly gain for the euro against the dollar.

Resistance in the euro is around $1.4255, the 61.8 percent retracement of the May to September decline.

Traders reported thin liquidity and said many investors had stopped trading, having been caught out by Thursday’s steep euro rally. Small offers were said to be starting to build up above $1.4200 and stops at $1.4260, with bids reported back at $1.4120/00.

Analysts said much of this month’s 5.8 percent rally in the euro against the dollar was driven by a squeeze of short positions and many speculators would be reluctant to start building bets against the euro ahead of a Federal Reserve meeting and G20 summit next week.

Standard’s Dickson believes, however, the short squeeze higher on the euro is almost done since the currency has rallied quite a bit from its low in September.

A European Central Bank policy meeting will also be in focus next week. The ECB is expected to keep interest rates on hold until December but there is an outside chance of a rate cut next week, according to a Reuters poll.

By contrast, prospects of another quantitative easing from the Fed have diminished, analysts said, as US economic numbers the last few weeks have improved. For Dickson, this should be supportive of the dollar at least against the euro.

“The combination of what we think is the need for easier monetary policy in Europe, plus a continuation of the improvement in US data suggests to us that for the remainder of this year, the euro will weaken again,” said Dickson, who forecasts euro/dollar at $1.30 by year-end.

The dollar steadied after sustaining heavy losses on Thursday, posting gains against the Swiss franc and Canadian dollar.

Commodity currencies, among the biggest gainers on Thursday, also pulled back, although by the early afternoon session, they were all trading little changed on the day.

The Australian dollar was slightly down at $1.0719, having surged on Thursday in its biggest one-day rally in 16 months. The New Zealand dollar was marginally up, at $0.8230.

Against the yen, the dollar was down 0.3 percent at 75.721 yen but off the all-time low of 75.661 touched on electronic trading platform EBS on Thursday.

That prompted Japanese Finance Minister Jun Azumi to repeat a warning that he would take firm steps against the yen’s rise as needed and kept traders on alert for any sign of intervention from the Japanese authorities.