Euro May Drop Below 100 Yen on Ichimoku Cloud Trends: Technical Analysis

The euro may fall below 100 yen to a nine-year low, Ueda Harlow Ltd. said, citing trading patterns.

A weekly ichimoku chart shows the common currency has stayed below the so-called conversion line and baseline, said Toshiya Yamauchi, a senior currency analyst in Tokyo at the online currency-trading company. That indicates any gains for the euro are likely to be capped, Yamauchi said.

“It continues to be in a downtrend, judging from weekly moves,” Yamauchi said in an interview with Bloomberg News yesterday.

The euro is set to drop to 105.44 yen, matching the level reached on Aug. 24 that was the lowest since July 2001, he said. Should it fall below that value, its next target will be 100 yen, a key psychological barrier, Yamauchi said.

The euro traded at 106.44 yen as of 6:54 a.m. in Tokyo from 106.37 in New York yesterday. It has fallen 20 percent against the yen this year. The currency last traded below 100 yen in June 2001.

Ichimoku analysis, developed by a Japanese journalist, is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. The conversion line plots the sum of the highest high and lowest low over the last nine trading weeks. The baseline is the same calculation over the past 26 weeks.

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: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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