Bloomberg News

Euro May Head Below $1.40, Citigroup Says: Technical Analysis

June 15, 2011

June 15 (Bloomberg) -- The euro may fall below $1.40 for the first time in three weeks, according to Citigroup Inc., citing technical indicators.

The failure of the euro to break above $1.4711, the 76.4 percent Fibonacci retracement level from the May 4 high of $1.4940, has seen the euro weaken 3.3 percent against the dollar. Today’s break below the 55-day moving average of $1.4409 may see the euro weaken to $1.3970, said Tom Fitzpatrick, chief technical analyst at Citigroup in New York.

“The inability to break the 76.4 percent retracement level signaled a danger to push lower,” Fitzpatrick said in an interview. “The euro is trading heavily, so our sense is we can go and retest the $1.3968 level and if that breaks there is a danger we see that move accelerate.”

The euro fell 1.8 percent against the dollar to $1.4185 at 1:14 p.m. in New York, from $1.4440 yesterday. The European currency touched $1.4181, the weakest since May 27.

Technical analysts who use the Fibonacci ratios described by Leonardo of Pisa in “Liber Abaci” in 1202 believe the price of an asset may reverse an earlier gain or decline after reaching certain levels.

Among those thresholds are the midpoint between an asset’s high and low points as well as levels marking the recovery of 61.8 percent, 38.2 percent and 23.6 percent of reversals of the previous trend.

--Editors: Paul Cox, Dennis Fitzgerald

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net;

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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