* Choppiness expected but with lack of much direction
* Euro has scope to $1.3775 if deeper correction unfolds
By Charlotte Cooper and Masayuki Kitano
TOKYO, Oct 19 (Reuters) - The dollar gingerly tested firmer ground on Tuesday after a bout of choppiness, and players didn't rule out an eventual 1.5 cent retreat by the euro if some long positions grew stale and unwound ahead of expected U.S. easing.
With quantitative easing from the Federal Reserve now well-priced in ahead of its Nov. 2-3 meeting, currencies have broken higher ground against the dollar, with the euro topping $1.4160 last week and the Australian dollar testing parity.
But squeezing out more gains is likely to be tough until the market sees how sizeable QE will be, with one trader saying, for Tuesday at least, short-term players were simply flipping positions within tight ranges.
The euro has failed to clear $1.4000 again after Friday's surge above $1.4100 and this was seen as a caution by some that more long euro/short dollar positions could unwind, with the euro's Oct. 12 low of $1.3775 seen as a possible target.
"I think we will see a pull-back in the euro in the near-term," said a Japanese brokerage house trader, noting the recent build-up of short dollar positions.
"The market probably has gone as far as it can go based on the factors in the United States."
The euro was flat at $1.3933, well below Friday's eight-month high. Initial support is expected at $1.3825, with resistance up at $1.40 and a move above $1.4050 needed to restart its rally.
But as traders play a waiting game, even moves down might not be sustained for long, with macro funds ready to buy as currencies fall against the dollar, said Robert Ryan, FX strategist at BNP Paribas in Singapore.
"Some positions will have been chopped over the past two days but it seems there's more support on the downside."
Treasury Secretary Tim Geithner gave a brief fillip to the dollar after he said the United States would not engage in dollar devaluation and also needed to work hard to preserve confidence in a strong dollar.
Analysts said the comment had little lasting impact beyond being a reassurance from the U.S. for investors to maintain confidence in the dollar as the world's reserve currency, after the greenback's fall of the past few months, and as tensions stir ahead of meetings of the G20 on talk of competitive devaluations.
"You can imagine that the U.S. might think it's time to say or do something which helps stabilise the dollar for the near term," said Greg Gibbs, currency strategist at Royal Bank of Scotland in Sydney.
The dollar index firmed 0.3 percent to 77.281. Technical analysts say it needs to extend above its Oct. 12 high of 77.93 to signal a short-term bottom is in place after Friday's 10-month trough of 76.144.
The dollar edged up against the yen to 81.38 yen, creeping further away from a 15-year low of 80.88 hit last week and a record low of 79.75 set in 1995.
SOME SUPPORT
The dollar drew some support from buying by Japanese importers, a trader said. But Japanese exporters were seen selling at levels near 81.30 yen, helping limit dollar gains.
The Nikkei business daily said major Japanese manufacturers were are planning to lower their assumed dollar/yen exchange rates for the fiscal second half to around 80 to 85 yen.
The Australian dollar fell 0.3 percent to $0.9867, correcting further after charging to parity with the U.S. dollar on Friday.
It initially firmed after the Reserve Bank of Australia's minutes from its on Oct. 5 meeting said the arguments to hold or hike rates were finely balanced, but later gave up the gains.
The RBA, which has been raising rates when the likes of the U.S. and other developed economies have been looking to ease, judged it had the flexibility to keep rates unchanged in October as a rising local dollar tightened monetary conditions, while domestic credit growth remained weak and global growth uncertain. (Contribution by Reuters FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford)