Chile’s peso gained as the price of its biggest export, copper, recovered from an earlier decline and on demand from investors who study charts for clues on when to buy and sell after the currency reached a key technical level.
The peso strengthened 0.1 percent to 492.4 per U.S. dollar, from 492.75 yesterday. It earlier fell 0.6 percent to 495.67 per dollar. The median forecast of 60 traders and investors in a central bank survey published today was that the peso would reach 490 in seven days.
The peso reached the strongest in four months on Jan. 23. It opened weaker today as copper fell before strengthening as copper futures in New York reversed their earlier losses and on buying triggered after the peso weakened to a level singled out by so-called Fibonacci analysis.
“We had copper falling and the euro depreciating but as the market tested 495.5 per dollar, which is the ceiling of the channel the currency had been in and a double technical roof, we had a wall of dollar sales,” said Cristian Donoso, a trader at Banchile Inversiones in Santiago. “There was a big round of dollar selling, which triggered stop-losses. At the same time, copper was flat and the euro recovered.”
Copper for March delivery declined as much as 1.3 percent to $3.76 a pound. It regained to $3.808 when peso trading ended, from yesterday’s close of $3.8075.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices tend to drop or rise by certain percentages after reaching a high or low.
Offshore investors in the Chilean peso forwards market reduced their short position in the currency to $4.7 billion, the lowest in seven weeks, on Jan. 23 as the peso reached a four-month high, central bank data show.