By Gyles Beckford and Cecile Lefort
SYDNEY/WELLINGTON, Aug 20 (Reuters) - The Australian dollar found a modest reprieve on Monday, drifting up from three-week lows against the euro and U.S. dollar as investors waited for further developments in Europe to tackle the region's debt crisis.
The euro struggled to make headway, having climbed to three-week highs of A$1.1850 on Friday when a wave of stop-loss sales broke key levels. It last fetched A$1.1798 , showing a loss of 0.3 percent on the day.
Major resistance at A$1.1845-55 was proving tough, with the euro having twice failed to break it. Initial support was found at the A$1.1775-90.
Still, charts suggest the euro rally has more room to run, with A$1.2100 as the next big figure. The euro gained 1.7 percent last week, its largest weekly gain since March, as investors unwound euro short positions to book profits.
On the longer-term, however, some investors forecast the single currency to test new depths.
Steve Goldman, a global portfolio manager at Kapstream Capital in Sydney anticipates a decline of 5 percent, at the very least.
"As we move closer into the fourth quarter and nothing material being done by policymakers other than talk, that will be a negative for the euro," he said.
Against the U.S. dollar, the Aussie nudged up to $1.0451. The local currency plumbed $1.0411 on Friday, its lowest since late July.
Major support seen around $1.0385-$1.0400, the 50 percent retracement of the $1.0170-$1.0615 move, ahead of $1.0320-40. Initial resistance seen at the $1.0455, ahead of $1.0490.
The Australian dollar recouped some of its hefty losses suffered against the kiwi, having plumbed one-month lows of NZ$1.2845 on Friday. It last fetched NZ$1.2905.
There were no local data on Monday but the Reserve Bank of Australia (RBA) releases minutes of its August policy meeting on Tuesday. Markets will be sensitive to any further discussion of the high Aussie currency and what, if anything, the bank might do about it.
NEW ZEALAND DOLLAR
The New Zealand dollar marked time with trading volumes thinned by holidays through Asia, and little data to push markets. The kiwi last traded at $0.8090, up 0.1 percent on the day. It climbed a 3-1/2-month peak of $0.8221 earlier in August.
"We suspect the New Zealand dollar is in for a bit more sideways consolidation this week," said Mike Jones, BNZ currency strategist.
The kiwi had retreated against a firmer U.S. dollar, which has benefited from a surge in bond yields, although Jones noted the yield gap between the two currencies was little changed.
"The currency's attractive yield differential will remain in place over the coming 6-9 months. We continue to target 0.8200 by year end," he said.
Near-term support for the kiwi was seen at last week's three week-low of $0.8037 ahead of $0.8015. Resistance was seen around Friday's high of $0.8125.
The most notable New Zealand event this week is the central bank's quarterly survey of inflation expectations for the next two years, due on Tuesday (0300 GMT). Expectations of future inflation have been falling for the past year.
Annual consumer price inflation for the second quarter was 1 percent, a 13-year low.
A private survey showed on Monday a slowing in growth for New Zealand's services sector, although it remained in expansion.
New Zealand government bonds closed largely flat.
Australian government bonds extended their recovery from three-month lows hit last week, with the three-year contract
adding 0.03 points to 97.180.
The 10-year contract edged up 0.035 points to 96.655 with resistance seen at 96.745, the 23.6 percent retracement of the May-August decline. Support is found at last week's trough of 96.56.
(Australia and New Zealand bureaux)
Copyright Thomson Reuters 2012. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
International money transfers at better rates than the banks.