July 6 (Bloomberg) -- The euro may be poised to gain against the Swiss franc after it approached a significant technical level, according to Citigroup Inc.’s Tom Fitzpatrick.
The New York-based bank took a profit on its bet that the euro would fall against the franc as the shared currency traded almost as low as 1.1936, a 76.4 percent Fibonacci retracement of its rally since June 24, when it dropped to 1.1806, the lowest level since the euro’s 1999 introduction.
“After the bounce we got recently, we came down, obviously, very, very quickly in the last 24, 48 hours,” said Fitzpatrick, chief technical strategist in New York, in a telephone interview. “We’ve generally seen a level of jitteriness with regard to Europe develop again.”
The 17-nation euro dropped versus the franc today as Portugal became yesterday the second nation in the currency region after Greece to receive a junk credit rating from Moody’s Investors Service, which cited the risk that the Iberian nation will require a second round of official financing.
The euro fell 0.8 percent to 1.2021 francs at 1:56 p.m. in New York, from 1.2130 yesterday, after touching 1.1967, the lowest level since June 29. The shared currency advanced to 1.2346 on July 4, the highest level since May 26.
“We believe in an ultimate move to 1.16 over the long term, but once again think we’ve come too far too fast,” Fitzpatrick wrote in a research note today.
Fibonacci analysis is based on the theory that securities tend to rise or fall by specific percentages after reaching a new high or low. It’s based on a formula developed by a medieval mathematician, Leonardo of Pisa, known as Fibonacci, who studied the reproduction rate of rabbits.
--Editors: Dennis Fitzgerald, Paul Cox
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