The euro may weaken to its lowest level in six weeks versus the dollar after reaching a “new corrective low” today, according to UBS AG (UBSN), citing technical indicators.
If the shared currency breaches support levels at $1.3219 and then $1.3187, it could decline to $1.3063, Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote today in a note to clients. It last touched $1.3063 on Jan. 10. UBS canceled its recommendation the euro will gain amid a recent decline in the currency, which has fallen 1.7 percent versus the greenback since touching yesterday’s high.
“The concern is now that we have more bearish trading conditions in place,” Adcock said in a telephone interview. “It’s not an outright bearish picture just yet, but we’ll need to see how markets will defend support levels.”
The 17-nation currency declined 0.7 percent to $1.3197 at 12:42 p.m. in New York after slipping to $1.3168. The euro reached $1.3711 on Feb. 1, its strongest level since November 2011.
A break above a resistance level at $1.3434 may result in a move higher to $1.3520, Adcock said. That would match the euro’s high from last week. UBS has a year-end forecast of $1.20, according to data compiled by Bloomberg.
The euro has increased 6.1 percent in the last six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen fell 17 percent, while the dollar has declined 0.5 percent.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered, and support is an area where there may be buy orders.
To contact the reporter on this story: Joseph Ciolli in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Dave Liedtka at email@example.com