Euro May Fall Toward 3-Month Low on Ichimoku: Technical Analysis

The euro may fall toward a three-month low after its ichimoku chart formed a so-called dead cross pattern, according to Bank of Tokyo-Mitsubishi UFJ Ltd.

The European currency’s conversion line dropped below the base line this month on its daily ichimoku chart, a bearish signal for the euro, according to Teppei Ino, an analyst at Mitsubishi UFJ. It fell to as low as $1.3048 yesterday, approaching the lower end of a so-called cloud on the chart.

“Various indicators are signaling weakness in the euro,” said Ino, whose Tokyo-based company is a unit of Japan’s biggest financial group by market value. “The current focus is whether the euro can hold above the lower end of the cloud.”

If the 17-nation currency declines past the cloud at $1.3033 and slides below $1.3, it may extend the drop to $1.2877, which is the 50 percent retracement from a July 24 low to Feb. 1 high, he said, citing the euro’s Fibonacci chart. It would match a Dec. 7 low, which was the least since Nov. 23.

The euro rose 0.2 percent to $1.3082 as of 12 p.m. in Tokyo after a 1 percent tumble yesterday.

Ichimoku analysis is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. The cloud refers to the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

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

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