* Euro steadies, but expected to stay under selling pressure
* Greek debt default concerns underline euro zone problems
* Dollar shakes off S&P outlook downgrade
By Naomi Tajitsu
LONDON, April 19 (Reuters) - The euro found its footing against the dollar on Tuesday as it paused from the previous day's sell-off, but debt problems in the euro zone continued to haunt the single currency, keeping it vulnerable to more losses.
The dollar held gains made the previous day, when risky assets were hit by a double whammy on mounting speculation that Greece will have to restructure its mountain of debt and Standard & Poor's threatened to cut the United States' prized AAA credit rating.
The euro edged up to the day's high around $1.4260, nudging higher after stop-loss orders were triggered above $1.4250. Still, its upside was seen limited given selling by a semi-official European name in the mid-$1.42 region.
In addition, traders said they were planning to sell the euro on any rallies to the $1.4260-70 region. The 21-day moving average, located around $1.4265, was also seen as initial resistance for the single currency.
The euro has pulled back sharply, having hovered at a 15-month high around $1.4520 for the past week, and analysts said the possibility that a country which has received a debt bailout may still have to restructure its borrowing could push the euro lower.
In the latest episode of the Greek debt saga, an Athens newspaper on Tuesday cited a senior European Commission official as saying Greece has accepted that it cannot avoid restructuring its debt. Athens has denied such claims.
Many in the market have flocked to U.S. assets despite the ratings outlook downgrade, on the view that such investments remained the safest bet during times of uncertainty.
"The European debt crisis is in the market's focus again, and people are concerned there is no lasting solution. Meanwhile, even negative news in the U.S. isn't putting too much pressure on the dollar anymore," said Lutz Karpowitz, currency analyst at Commerzbank in Frankfurt. "There isn't a dollar-negative sentiment anymore."
RISK POSITIONING
The dollar slipped a touch on the day against a currency basket to 75.407, but it stuck near its highest in more than a week hit on Monday.
The U.S. currency slipped 0.1 percent on the day to 82.55 yen as the Japanese currency edged broadly higher after elevated risk aversion prompted investors to cut back on carry trades, which involve selling the low-yielding Japanese currency for higher-yielding ones.
Many in the market expected the S&P threat would be followed by similar negative reassessments from other ratings agencies, which may curdle sentiment for U.S. Treasuries and the dollar.
But analysts at Credit Agricole CIB said the market's apathy to the S&P announcement suggested a positive sign for the dollar.
"It remains important to maintain perspective ... the reality remains no comparable asset exists for U.S. Treasury in terms of depth of liquidity," they said in a note, adding that they expected the euro to fall to $1.39 by end-June.
In addition, a build-up of positions in risky assets -- IMM futures speculators held near-record long positions in the Australian dollar last week, while euro longs hit a three-year peak -- suggests that a squeeze could be significant.
Still, analysts said longer-term bearish views on the U.S. dollar and the yen remained intact with both the Federal Reserve and the Bank of Japan set to keep monetary policy ultra-loose while interest rates in some other countries keep rising.
This would keep intact the funding-currency status of the dollar and the yen in carry trades where they are used to fund investments in higher-yielding and riskier assets. (Additional reporting by Asia Forex Team; editing by Stephen Nisbet)