The euro may extend gains that have pushed it to the strongest since April versus the yen after first weakening to a level of so-called support, Credit Suisse Group AG said, citing trading patterns.
The 17-nation currency is poised to advance toward 107.74 yen, the 78.6 percent retracement of its slide from March until July, according to analysts including David Sneddon, head of technical analysis research in London, citing so-called Fibonacci theory. Before that takes place, the euro is initially poised to weaken to 104.62 yen, which represents the highs set last month, they wrote.
“Acceleration through 104.83 yen paves the way for further upside, eventually to 107.74 yen,” the analysts wrote in an e-mailed note to clients. “Pivotal support now lies at the 104.62 prior high and we expect a brief correction back to this level before the market extends higher.”
The euro gained 0.6 percent to 106.50 yen at 1:53 p.m. in London after rising to 106.58 yen, the strongest level since April 30. The last time it traded at 107.74 yen was April 23.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Support refers to an area where buy orders may be clustered.
In technical analysis, investors study charts of trading patterns and prices to predict changes in a security, currency or index.