The euro may decline as much as 6 percent to $1.259 against the dollar should it fail to breach a key resistance level, Societe Generale SA said, citing technical indicators.
“We continue to think that the rise initiated at $1.2620 in January is corrective,” technical analysts Hugues Naka and Fabien Manac’h in Paris wrote in a research note based on data compiled by SocGen. The 17-nation common currency dropped to $1.2624 on Jan. 13, the weakest level since August 2010.
The euro weakened 0.3 percent to $1.3404 at 11:28 a.m. London time. It strengthened to $1.3487 on Feb. 24, the highest since Dec. 5, data compiled by Bloomberg shows.
“The upper end of the medium-term declining channel, which comes in at $1.3570 this week, should cap the upside and force euro-dollar to point back towards the intermediate downside target of $1.2590/$1.2620,” the SocGen analysts wrote.
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.