Europe's common currency shuttled between gains and losses

as Greece's talks dragged on. The market has become driven mainly by headlines out of Europe, similar to what happened late last year.  

After repeated delays which have prompted warnings that the euro can live without Athens, Greek political leaders finally gathered to agree a reform deal in return for a new EU/IMF rescue plan to avoid a chaotic default.

Greece's leaders must agree to the terms for the new 130 billion euro ($172.3 billion) rescue which Athens needs to avoid going bankrupt next month when big debt repayments are due. 

"There seems to be progress on Greece, but there is no definitive outcome so people are hesitant to push the euro higher," said John Doyle, director of markets at Tempus Consulting in Washington.  

He said there were sellers of the euro between $1.3250-$1.3275. 

Financial markets positioned for an eventual deal being done, with prices of US Treasury and German government bonds, which investors buy at times of uncertainty for their perceived safety, down. 

News that Italy's economy likely contracted in the fourth quarter also kept euro gains contained.

In afternoon New York trade, the euro was unchanged at $1.3264 after earlier rising to $1.32890, its highest level since Dec. 12 on trading platfrom EBS.

The intraday bias on the euro remained positive, with resistance at the 100-day moving average around $1.33339, while option-related offers were reported ahead of $1.3300. 

Technical strategists also said the rebound from the January low of $1.26260 has just resumed and market participants should now be targeting $1.34324, the 50 percent Fibonacci retracement of the move from the late October high of $1.42480 to that mid-January trough. 

On the downside, a break of support at $1.30260 — the Feb. 1 low - is needed to signal the completion of the current uptrend.

Otherwise, analysts said the near-term outlook will remain mildly bullish even in case of a pullback. 

Any Greek agreement, however, should offer only a short-term boost to the euro, they added. 

Morgan Stanley strategists said they established a short euro position at $1.3250, targeting $1.2390 with a stop at $1.3350, given the structural problems still facing the euro zone even if Greece gets a second bailout. They believe that the Greek deal has been largely priced into the euro/dollar pair. 

The euro hit a seven-week peak of 102.43 against the yen and was last up 0.3 percent at 102.16 yen. Traders said the outlook was positive while above support around 101.46, the base of the Ichimoku cloud, a closely-watched Japanese indicator. 

The dollar was last up 0.3 percent against the yen at 77.04. News that Japan's current account surplus shrank sharply to a 15-year low in 2011 weighed on the yen.

Looking ahead, currencies could be swayed by monetary policy meetings from both the Bank of England and the European Central

Bank on Thursday. 

"We expect no change in the policy rate and no announcement of further easing measures from the ECB," said Mark McCormick,

currency strategist at Brown Brothers Harriman in New York. 

"However, we do expect the BoE to announce another round of QE (quantitative easing), though it remains possible that this

decision is not unanimous," he added. 

ECB President Mario Draghi may possibly provide some insight into the bank's willingness to participate in the Greek debt

restructuring, he said. 

"We believe the combination of a dovish Fed and reduction in the euro zone risk premium could see the euro test $1.34-1.36 on

a convincing break of $1.325."