South Korea’s won may climb 3.7 percent by the end of next week after the currency completed a “double bottom” against the greenback, according to Mitsubishi UFJ Morgan Stanley Securities Co.
The won on June 21 rose beyond 1,191.90 per dollar, the strongest level reached between its May and June lows of 1,277.85 and 1,271.45, and this is a bullish signal for the currency, said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ. The won may appreciate to 1,144.15 next week, Shioiri said, citing a Fibonacci chart that is based on a sequence of numbers.
“The trend for the won should remain bullish as long as it trades stronger than the 1,200 level,” Shioiri said. “Declines today and yesterday are considered just a temporary correction.”
The won weakened 0.4 percent to 1,186.23 per dollar as of 12:40 p.m. in Seoul, according to data compiled by Bloomberg. It yesterday slid 0.9 percent, after jumping 2.6 percent on June 21 and 3.6 percent last week.
The currency slid from 1,102.85 on April 26, the strongest level since September 2008, to a 10-month low of 1,277.85 on May 25. Shiori’s forecast rate of 1,144.15 would represent a 76.4 percent retracement of that decline. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Significant levels are 23.6 percent, 38.2 percent, 61.8 percent 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.