Bloomberg News

Won May Weaken on Fibonacci, Moving Average: Technical Analysis

September 13, 2011

Sept. 14 (Bloomberg) -- South Korea’s won may weaken 4.5 percent against the dollar by the end of next month after it fell below key technical levels, according to Mitsubishi UFJ Morgan Stanley Securities Co.

The won dropped below its 200-day moving average in onshore trading today, breaching a key level in a series of numbers known as the Fibonacci sequence by erasing 50 percent of its gain from this year’s low of 1,144 reached March 17 to the 2011 high of 1,048.30 set on July 27. The Dollar Index, which tracks the greenback’s performance against those of six major trading partners, broke above its 200-day moving average last week, a bullish sign for the greenback.

“The trend seems to have turned around for the dollar’s appreciation against the won and across the board,” said Minoru Shioiri, chief manager of foreign-exchange trading at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “The 200-day moving average is quite an important technical indicator that many market players watch.”

The won slumped 1.5 percent from last week’s closing level to 1,092.68 per dollar as of 9:36 a.m. in Seoul, touching a low of 1,101.53, according to data compiled by Bloomberg. The 200- day moving average is at 1,096.14 today and a 50 percent retracement on the Fibonacci is 1,096.15.

The currency may revisit its 2011 low of 1,144 by the end of October, Shioiri said. Onshore financial markets were closed the last two days for a holiday.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Other Fibonacci levels are 23.6 percent, 38.2 percent, 61.8 percent and 76.4 percent. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

--Editors: James Regan, Sandy Hendry

%KRW %USD

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Ronnie Harui in Singapore at rharui@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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