* Hedge funds, prop traders and stops pressure euro-traders
* Euro nears Ichimoku support and 100-day MA near $1.3985
* Rumours of snap election in Greece weigh on euro
* Talk of stop-loss euro selling near $1.3968
* News of GE Capital's Australian asset sales dents AUD
By Chikafumi Hodo and Antoni Slodkowski
TOKYO, May 25 (Reuters) - The euro fell on Wednesday, pressured by selling by hedge funds and stop-loss offers as worries over Greece's finances cast a pall over the single currency, bringing it closer to testing crucial support levels on charts.
Speculative selling of the euro intensified as rumours
swirled about Greece and investors trimmed risky positions,
with a drop in U.S. stock index futures
Traders cited rumours that Greece may call a snap election, as well as a rumour that Greek Prime Minister George Papandreou may resign, as factors that dragged the euro lower.
On Tuesday, Papandreou had failed to get consensus from opposition leaders on new austerity measures aimed at averting a default by Greece. [ID:nLDE74N139]
The euro seemed poised for a test of chart support following its latest drop, with the bottom of the cloud on the daily Ichimoku chart, a Japanese technical analysis tool popular among traders, and the euro's 100-day moving average both nestled near $1.3985.
A clear breach of such levels may open the way for a further drop in the euro, especially since stop-loss offers are said to be lurking near $1.3968, a two-month low struck earlier this week on trading platform EBS.
"The market consensus is that the euro will fall to $1.38 within the next 1-2 weeks or sooner," said a customer trader at a Japanese bank.
"This fall may be accelerated after it hits stop losses seen around 1.3969-70, near its recent lows. Once that level is broken the euro can go all the way down to $1.38," the trader said.
The euro fell 0.5 percent to $1.4028
A customer dealer for a major Japanese bank said there was talk of active euro-selling by hedge funds, with stop-loss selling adding to the euro's decline. Another trader cited euro selling by proprietary traders.
Traders said euro-buying by Asian investors such as Asian central banks helped lend some support to the single currency. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FX COLUMN-Euro breakdown paves way to $1.35 [ID:nL3E7GN0H4] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar rose broadly as investors cut back on risk
taking, with the Australian dollar falling 1 percent to $1.0452
Traders said the Australian dollar took a hit from news
that GE Capital
Underscoring its broad gains, the dollar rose 0.4 percent against a basket of currencies to 76.206 <.DXY>, near a high of 76.366 hit earlier this week, its highest since April 1.
That brought the dollar index closer to resistance on the daily Ichimoku chart at 76.573, the top of the cloud. A clear breach of the cloud top would be bullish for the dollar.
The dollar is also near the top of the daily Ichimoku cloud against the yen, with resistance at 82.343 yen.
The dollar dipped 0.2 percent against the yen to 81.80 yen
The yen took in its stride data showing that Japan posted a smaller than expected trade deficit in April. [ID:nL3E7GP05O]
"More than the numbers themselves, I think the more important issue is how long this type of situation will persist," said Koji Fukaya, director of global foreign exchange research for Credit Suisse Securities in Tokyo, referring to the disruptions to production caused by the March 11 earthquake and tsunami.
For dollar/yen to add to its recent gains, financial markets would likely need to return to more of a risk-taking mode, Fukaya said, adding that recent declines in U.S. Treasury yields may for now temper gains in the dollar against the yen. (Additional reporting by Masayuki Kitano and Yoshiko Mori in Tokyo, and Reuters FX analysts Krishna Kumar in Sydney and Rick Lloyd in Singapore; Editing by Michael Watson and Chris Gallagher)