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Peso Slide Below Average Signals 2.5% Drop: Technical Analysis

Philippine peso banknotes
The peso slid 0.2 percent to 46.73 per dollar as of yesterday’s close in Manila. Photographer: Ian Waldie/Bloomberg

The Philippine peso will decline 2.5 percent against the dollar after repeatedly dropping below its 200-day moving average in the past two weeks, according to Okasan Securities Co.

The currency may drop to 47.877, the lowest level since Sept. 18, said Tsutomu Soma, a bond and currency dealer at Okasan. The peso’s failure to hold gains after bouncing back through the technical level, first breached on May 21, is a “bearish” signal, he said.

“A break of the 200-day moving average again shows the recent gain was just a correction, and the peso will resume its decline,” Tokyo-based Soma said.

The peso slid 0.2 percent to 46.73 per dollar as of yesterday’s close in Manila, according to Tullett Prebon Plc. It dropped to a five-month low of 47.097 on May 25 after falling beyond the 200-day average of 46.4962 on May 21.

The 47.877 level represents a 61.8 percent retracement of its gain from a low of 50.175 on Nov. 21, 2008, to a high of 44.158 on April 26, Soma said, citing to a series of numbers known as the Fibonacci sequence.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Other Fibonacci points are 23.6 percent, 38.2, 50 and 76.4 percent. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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