Aussie May Fall to 3-Year Low, JPMorgan Says: Technical Analysis

The Australian dollar may fall to its lowest level in almost three years after breaching a key level of support, according to JPMorgan Chase & Co., citing technical indicators.

The Aussie may decline to 87.70 U.S. cents, its weakest level since July 22, 2010, after falling below minor support at 90, according to Niall O’Connor, a New York-based technical analyst at JPMorgan. Australia’s currency weakened to less than 90 today for the first time since September 2010. The Aussie has been the worst-performing major currency over the last six months, decreasing 14 percent versus the U.S. dollar.

“Today’s decline suggests a higher risk for new lows into next week,” O’Connor wrote in an e-mail. “Deeper targets enter at the 87.70-to-88.80 zone. It should try to bounce from there.” The target zone represents the 76.4 percent Fibonacci retracement from the 2010 low, O’Connor said.

Australia’s currency depreciated 1.4 percent to 90.61 U.S. cents at 10:51 a.m. in New York after earlier falling as much as 2.1 percent to 89.99.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index. Resistance refers to an area on a chart where sell orders may be gathered, and support is an area where there may be buy orders.

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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