FOREX-Euro clings to gains but more obstacles lurk

* Euro helped by chances of another aid package for Greece

* A large part of euro long positions may have been cleared

* Stabilising commodity prices support euro

* China data misses forecast but has limited impact

By Hideyuki Sano

TOKYO, May 11 (Reuters) - The euro clung to its gains of the past few days on Wednesday, helped by stabilising commodity prices and speculation about another Greek aid package, but a further foray to the upside is seen filled with obstacles such as the chance of negative news on the prospects of the euro zone's efforts to help Greece and other financially strained countries.

The risk-sensitive euro and the Australian dollar dropped briefly after data showing Chinese industrial production and retail sales fell short of market expectations, but they quickly pared losses as China shares recovered.

"I thought the data was quite weak and there could have been more selling. But the market positioning (in euro longs) is much lighter than before, so the euro's reaction to any negative news is smaller," said Masafumi Yamamoto, chief currency strategist at Barclays Capital.

The euro traded at $1.4390 , down 0.1 percent on the day but still keeping most of its gains from a three-week low of $1.4254 hit on Monday.

Some traders suspected much of the bloated long positions in the single currency were likely to have been unwound during a torrent of selling since last Thursday that pushed the currency down by 4.6 percent from a 17-month peak of $1.4940. Speculators' net long positions hit the highest since July 2007 in the week to May 3, based on data from a U.S. regulator.

As the unwinding of euro long positions had been in part triggered by massive falls in oil and commodity prices last week, some signs of stabilisation in commodity prices are helping the euro.

The euro got a boost on Tuesday after a Dow Jones news agency report, citing a senior Greek government official, said Athens expects to receive a new aid package totalling nearly 60 billion euros ($87 billion) as soon as next month. [ID:nLDE7490UN]

Although Greece denied the report, some market players expect additional funding sooner or later given fears that other options -- such as debt restructuring or even an exit from the euro zone by Greece -- would be more painful and cause more losses among European banks.

"I think giving Greece more financing is the only option they can take. But the euro will be driven by news headlines for now. It can easily move 100 pips in either direction," a trader at a Japanese brokerage said.

French Finance Minister Christine Lagarde told Le Figaro newspaper in an interview for publication on Wednesday that it is hard to see Greece returning to debt markets in 2012, as envisaged under an EU bailout package, and Europe would have to keep financing countries in difficulty to avoid a costly restructuring. [ID:nLDE7492K4]

But many market players also expect more twists and turns before any deal is reached on Greece, likely causing ups and downs in the euro.

Adding to uncertainty, a German member of parliament questioned whether Greece had met terms for its next aid tranche. A source close to European Union and International Monetary Fund inspectors in Athens said it was too early to say. [ID:nLDE7491FC]

MORE WORRY

Greece is not the only source of worry for investors, with Finland delaying a parliamentary vote on the EU's Portugal bailout plan to Friday from Wednesday because the country's second-largest party remained undecided.

The Finnish parliament's approval is important because it, unlike others in the euro zone, has the right to vote on EU requests for bailout funds. [nLDE74910V]

But traders are also weighing the euro zone's troubles with another big theme that has driven the market this year -- dollar weakness stemming from the Federal Reserve's reluctance to raise interest rates from near zero.

Just last week the dollar hit a three-year low against a basket of currencies <.DXY> as a run of softer-than-expected U.S. data in recent weeks reinforced expectations that any Fed rate hike will be many months away, in contrast with the ECB, which raised rates in April and is expected to boost them further in the coming months.

The dollar index <.DXY> stood at 74.627, flat on the day and 2.6 percent above the low of 72.696.

"There are so many uncertainties at this point. But when people really don't know what to expect, a currency with higher interest rates tends to be bought," said Takako Masai, manager of forex at Shinsei Bank.

The greenback stood little changed at 80.88 yen , maintaining its gains since it marked a seven-week low of 79.57 yen last Thursday. It rose as high as 81.10 yen, its highest level in a week, helped by buying from Japanese investors. But offers lined up at 81.20 yen were keeping the dollar's gains in check.

Options traders are said to be saddled with gamma long positions at around 81 yen after dollar calls expiring on Monday with a strike price of 81 yen were traded on Tuesday, which means the dollar may stick around that level because option traders have to sell dollars above 81 yen and buy below that level for delta hedging.

Technically, the yen is trying to stay above the bottom of a cloud on the daily Ichimoku chart at 80.89 yen.

The Australian dollar stood at $1.0860 , up 0.2 percent on the day, weathering disappointment from the Chinese data.

($1 = 0.690 Euros) (Additional contribution from Reuters analyst Krishna Kumar in Sydney; IFR; Editing by Joseph Radford)