The euro may fall to its lowest level against the pound in two weeks as it breaks into a retracement phase after its recent high, according to the Royal Bank of Canada.
The 17-nation currency will target a level between 84.74 pence and 83.99 pence per euro, the 38.2 percent and 50 percent Fibonacci retracements of the Feb. 1 high of 87.17, George Davis, chief technical analyst for fixed-income and currency strategy at RBC in Toronto, wrote yesterday in a note to clients. The shared currency, which has strengthened 6.8 percent versus the pound during the past three months, will find support at the 61.8 percent retracement level of 83.24.
“We would be looking for this pullback to materialize over the next month or so,” Davis wrote in an e-mail.
The euro declined 1.3 percent to 85.26 pence yesterday in New York, after falling as much as 1.4 percent. The euro last reached 83.99 on Jan. 24. It was little changed at 85.24 pence as of 6:57 a.m. in London.
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 be certain percentages after reaching a new high or low.
Support refers to an area on a graph where analysts expect buy orders to be clustered.