Bloomberg News

Euro May Fall Toward 2011 Low Against Dollar: Technical Analysis

September 26, 2011

Sept. 27 (Bloomberg) -- The euro may fall toward this year’s low versus the dollar should it drop below key levels, Gaitame.com Research Institute Ltd. said, citing trading patterns.

The 17-nation common currency has entered a so-called weekly ichimoku cloud and is likely to first drop to $1.3183, which represents the second leading span-line, or the bottom of the cloud, according to Takuya Kawabata, a researcher in Tokyo at the unit of Japan’s largest foreign-exchange margin company.

The euro may then target $1.3047, a 61.8 percent Fibonacci level, should it breach the 50 percent retracement of its advance from a low of $1.1877 reached on June 7, 2010 to a high of $1.4940 seen on May 4 this year, Kawabata said.

“If the euro can’t stop falling from those levels, it may lead to further declines,” Kawabata said. “This year’s low of the 1.28 level may come in sight.”

The euro traded at $1.3498 today as of 8:53 a.m. in Tokyo from $1.3533 in New York yesterday. The currency touched $1.2867 on Jan. 10, the weakest level this year.

Ichimoku charts are used to predict a currency’s direction by 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.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level. Support refers to an areas where buy orders may clustered. Resistance is where there may be orders to sell.

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

--Editors: Nate Hosoda, Jonathan Annells

To contact the reporters on this story: Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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