Citigroup Says Dollar to Fall After Key Level Breach: Technical Analysis

The dollar’s close below its 200-day moving average yesterday means it has further to fall, according to Citigroup Inc.

The Dollar Index closed yesterday at 80.60, below the 200- day moving average of 80.713. That means the dollar will extend its downward trend, according to a note today by technical analysts Tom Fitzpatrick in New York and Shyam Devani in London.

“Further losses are still likely,” they wrote. “A breach of the 80.40-79.92 area, especially on a weekly close basis, would be a significant development suggesting further losses for the U.S. dollar over an extended period down to below 75.”

IntercontinentalExchange Inc. uses the Dollar Index to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona. The dollar has declined in the past month against all of its 16 major counterparts tracked by Bloomberg, sliding 4.4 percent against the euro and 4.3 percent against the pound.

The U.S. currency dropped today to an eight-month low of 85.33 yen because of speculation the world’s largest economy may require additional stimulus measures to support the recovery. The next support level is 84.20 and the next pivot is 83.40, which may be a “pressure point” for Japanese authorities, the analysts wrote.

A support level is an area on a chart where buy orders are clustered. The stronger the support, the more selling is needed to drop below that level. Pivot points refer to levels at which a currency or asset price changes direction.

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: Mary Childs in New York at mchilds5@bloomberg.net

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