Euro to Test 3-Year Yen High, JPMorgan Says: Technical Analysis

The euro may rally to its highest level against the yen in more than three years after breaking through a 2011 high, according to JPMorgan Chase and Co.

The 17-nation currency will target a level of 127.95/128.50 yen per euro, near the 76.4 percent Fibonacci retracement of the decline from the June 2009 peak, Niall O’Connor, a technical analyst at JPMorgan, wrote today in a note to clients. The shared currency, which has gained 23 percent versus the yen during the past three months, will find support at 123.20 after breaking through “the important 123.35 high from 2011,” O’Connor said.

“The yen weakness story is very much still intact and there is no sign of a reversal,” O’Connor said in a telephone interview from New York. “One twenty-eight is the next big target zone.”

The euro gained 1.5 percent to 126.72 at 12:20 p.m. in New York after falling as much as 1.6 percent yesterday, the biggest intra-day drop since Jan. 2. The euro last reached 128.50 yen on Jan. 20, 2010.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered.

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.

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