The euro may drop as low as $1.2585 against the dollar after it failed to break above a key resistance area, Societe Generale SA said, citing technical indicators.
“The $1.3445/1.3450 pullback area forced euro-dollar to turn lower, confirming the short-term risk is to the downside,” technical analysts Hugues Naka and Fabien Manac’h in Paris wrote in a research note today. “A dip back to last week’s low at $1.2970 remains the most likely scenario.”
The euro dropped 0.9 percent to $1.3288 at 2:51 p.m. in London. It reached $1.2969 on Nov. 30, according to Bloomberg data.
“A break below this low and then below the $1.2920 pullback level would call for a dip to the $1.2585/90 region before euro-dollar attempts to head north again,” they wrote. That compares with the $1.2588 low from Aug. 24, according to Bloomberg data.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index. Support is where buy orders may be grouped, and resistance is a level where sell orders may be clustered.