Taiwan Dollar May Fall 1 Percent as Golden Cross Forms: Technical Analysis
Taiwan’s dollar may weaken 1 percent to its lowest level since September after the dollar’s short- term moving average crossed a longer-term line, a bearish signal for the island’s currency, according to Mitsubishi UFJ Morgan Stanley Securities Co.
Taiwan’s currency may drop to NT$32.808 in a month, which represents the next key resistance level for the greenback on a Fibonacci chart, said Minoru Shioiri, chief manager of foreign- exchange trading in Tokyo at Mitsubishi UFJ. The local dollar traded at NT$32.442 as of 10:30 a.m. in Taipei and is down 0.7 percent this month.
The U.S. currency formed a “golden cross” on June 4, when the 20-day moving average on its chart crossed above the 200-day line. The Taiwan dollar has since declined 0.3 percent. It now targets NT$32.808, a 38.2 percent reversal of its appreciation from a low of NT$35.297 on March 3, 2009, to a high of NT$31.269 on April 27, Shioiri said, citing a series of numbers known as the Fibonacci sequence.
“The golden cross indicates the medium- to long-term trend for the Taiwan dollar turned weak,” said Shioiri. “History also shows the 200-day moving average is quite helpful to forecast the trend. The Taiwan dollar may stay under pressure.”
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Other Fibonacci points are 23.6 percent, 50, 61.8 and 76.4 percent.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.