The euro may strengthen against its U.S. counterpart to the highest level in more than a year if the shared currency closes the week above a so-called retracement level of $1.30, according to UBS AG, citing technical indicators.
The shared currency closed above $1.3002 yesterday, signaling an upward trend that may see it test $1.3150, the 38 percent Fibonacci retracement level of a broad bearish move in the euro from May 2011 to July, Richard Adcock, head of fixed-income technical strategy at UBS AG in London, wrote today in a note to clients. The euro could rise to $1.3490, its highest level since Dec. 2, 2011, if it closes the week above $1.30, Adcock said.
“You have a controlled uptrend and momentum is turning up,” Adcock said in a telephone interview. “The market is saying that the correction consolidation phase is ending and we’re now set to resume a bullish trend.”
The euro increased 0.3 percent to $1.3038 at 10:41 a.m. New York time after earlier gaining 0.4 percent to $1.3053, its highest level in nearly a week. The 17-nation currency rose 0.7 percent to 108.06 yen.
The euro has weakened 2.2 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar dropped 2.8 percent, and the yen slid 10.5 percent.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, known as Fibonacci, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.