Euro May Hit $1.31 as Neckline Topped, Citigroup Says: Technical Analysis
The euro may rally to $1.31, a level last seen in May, after breaking above the neckline of a reverse head-and-shoulders pattern, according to Citigroup Inc.
The 16-nation currency closed yesterday at $1.2527, above the $1.2508 neckline, strategists led by Tom Fitzpatrick in New York wrote in a note to clients published today. The euro appreciated earlier today to $1.2612, a level above its 55-day moving average of $1.2250.
“We would now like to seek a close above the 55-day moving average before confirming what looks like a bullish break,” the analysts wrote.
The euro advanced 0.1 percent to $1.2535 at 2:09 p.m. in New York. The 16-nation currency was last above $1.31 on May 4, when it touched $1.3214.
A head-and-shoulders pattern is formed when a currency makes three consecutive peaks on a chart, with the middle being the highest. The line that connects the peaks between the troughs is known as the neckline. A reverse head-and-shoulders formation has three successive troughs. A break of the neckline may indicate a reversal of a decline.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Alex Kowalski in New York at Akowalski13@bloomberg.net
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