(Recasts, adds quotes, detail, updates prices)
* German FinMin sees no definitive solution at Oct. 23 EU summit
* Comments dent optimism, push euro off one-month high vs dollar
* Cleaner euro positioning makes euro downside vulnerable
By Neal Armstrong
LONDON, Oct 17 (Reuters) - The euro fell on Monday after the German Finance Minister said the upcoming European Union summit would not definitively solve the region's debt crisis, denting investor optimism over the talks which had earlier pushed the currency to one-month highs.
The euro was last down 0.7 percent against the dollar at $1.3781 after Germany's Wolfgang Schaeuble's comments, having risen to its highest since Sep. 15 at $1.3914 in earlier dealing on trading platform EBS.
"The optimism that's been pushing the euro higher definitely seems to be overdone," said Raghav Subbarao, currency strategist at Barclays Capital.
"Some of the move last week was due to extreme short positions which should now have been cleaned out to some extent and that leaves the euro vulnerable," he added.
Traders said offers ahead of $1.3930 had halted the euro's advance towards the pivotal $1.40 level in the near term. Technical resistance was at $1.3937, marked by a couple of daily highs hit in September and backed up by the 55-day moving average around $1.3952.
The euro has recovered strongly since hitting a nine-month low around $1.3145 on Oct. 4, but its recent gains have left it vulnerable to a pullback if investors become worried EU leaders may not be able to contain the debt crisis.
"Generally investors would rather be long dollar and short euro and would be quick to reset those positions," said Niels Christensen, currency strategist at Nordea in Copenhagen.
Data showed speculators pared a good portion of short euro positions in the week to Oct. 11, with the subsequent rally to one-month highs likely to have further reduced those shorts.
The dollar index briefly fell to a one-month low of 76.441 before recovering to 77.013, up 0.5 percent on the day.
The euro rallied 3.5 percent against the dollar last week after the leaders of Germany and France pledged to unveil a new package for solving the two-year crisis at the EU summit, including an agreement on how to recapitalise banks.
"Policymakers will announce a plan but there are questions about whether that plan will be credible in the market's view," said Subbarao.
UNCERTAINTIES REMAIN
Above $1.40, the euro faces resistance around $1.4076, its 200-day moving average. It has traded below this technical indicator since early September.
While attendees at the G20 summit said the pace of discussions was encouraging, policymakers face resistance from banks over moves to increase private sector participation in Greek debt restructuring and to force banks to raise capital.
Underscoring the difficult issues to be addressed, Germany's Schaeuble said on Sunday that Greece's debt crisis could not be solved without larger write-downs on Greek debt.
Schaeuble speaks again in London later on Monday.
In July, private creditors agreed to a voluntary write-down of 21 percent on their Greek debt, a figure which now looks insufficient. Euro zone officials said last week that losses were likely to be between 30 and 50 percent.
"If recent media reports are confirmed and the amount of haircuts does not exceed 50 percent, in our view this may fail to appease concerns about the sustainability of the Greek debt and thus provide no lasting support for the euro," Citi strategist Valentin Marinov said in a note.
The euro fell from a five-week high of 107.67 yen to trade down 0.6 percent on the day at 106.45 yen.
Earnings from U.S. companies including Citigroup , Goldman Sachs and Apple could also affect the euro's performance, which has closely tracked investors' appetite for stocks and other risky assets. (Additional reporting by Jessica Mortimer; Graphic by Scott Barber, editing by Nigel Stephenson/Ruth Pitchford)