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Euro May Advance From Two-Month Low: Technical Analysis

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April 20 (Bloomberg) -- The euro may extend its rally from a two-month low against the yen, according to Gaitame.com Research Institute Ltd., citing trading patterns.

The 17-nation currency formed three-consecutive white bars on its candlestick chart and exceeded the colored bar formed on April 13, signaling “the euro is bottoming out,” said Takuya Kawabata, a researcher at Tokyo-based Gaitame.com. White bars show that the currency’s closing price is higher than the opening level, while the colored ones indicate the opposite.

The euro may be headed for a high reached on Feb. 27, a most that would form a so-called head-and-shoulders pattern with a March 21 high being the head, said Kawabata, whose company is a unit of Japan’s largest foreign-exchange margin firm. A head-and-shoulders pattern appears when a currency makes three consecutive peaks, with the middle the highest.

The euro was little changed 107.25 yen as of 10:45 a.m. in Tokyo after touching 104.63 on April 16, the lowest since Feb. 20. The common currency reached 109.93 on Feb. 27 and advanced to as high as 111.44 on March 21, a level unseen since October.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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