Related News:
Euro to Rise to $1.46, Highest This Year, on Trendline: Technical Analysis
The euro may rise to $1.46, the highest since December, should it breach $1.31 in the near term, Sumitomo Mitsui Banking Corp. said, citing trading patterns.
The euro “completely bottomed out” at a four-year low on June 7 after having factored in the results of Europe’s stress tests of banks, said Daisuke Uno, chief strategist in Tokyo at the unit of Japan’s third-largest banking group. The near-term focus for the euro is whether it passes $1.31, which is on a descending trend line that connects the highs of $1.3818 on March 17 and $1.3692 on April 12, Uno said.
“A clear break above that key level would light up a buying signal, pushing the currency toward a V-shaped ascending path,” Uno said.
The euro touched a 16-month high of $1.5144 on Nov. 25, before sliding to $1.1877 on June 7, the weakest level since March 2006, as the European debt crisis deepened. The common currency traded at $1.3056 as of 10:01 a.m. in Tokyo.
Another near-term target is $1.3125, a 38.2 percent retracement of a drop from the Nov. 25 high to the June 7 low, based on the Fibonacci sequence, Uno said.
Uno set the medium-term target for the euro at $1.46 to $1.47 based on an inverted head-and-shoulders pattern. The pattern is formed when a currency makes three consecutive troughs on a chart, with the middle the deepest. The three troughs are lows reached on May 19, June 7 and June 29.
Fibonacci analysis is based on a formula developed by 13th century mathematician Leonardo da Pisa, known as Fibonacci, who discovered the sequence while studying the reproduction rate of rabbits. Analysts use the indicator to determine levels where buy and sell orders may be clustered.
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: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.
Rate These Stories
Rate this Page