Sept. 29 (Bloomberg) -- The euro’s rebound against the dollar will likely continue for just about a week before the currency forms a top and heads lower, according to Bank of America Corp., citing technical indicators.
The 17-nation euro approached a one-week high versus the dollar today as Germany’s lower house of parliament approved the expansion of a bailout fund for debt-stricken euro-area nations to help contain the sovereign-debt crisis. The euro gained as much as 1 percent to $1.3679 after rising to $1.3690 yesterday, the strongest since Sept. 21.
A “sustained break” of the $1.3586 to $1.3596 would likely be followed by a move to resistance in the $1.3863 to $1.3902 band, and potentially as high as $1.4, before the momentum wanes, MacNeil Curry, head of foreign exchange and interest rates technical strategy at Bank of America Merrill Lynch, wrote in a note to clients today. Resistance is an area where sell orders may be clustered, making additional gains difficult.
“On a near-term basis the euro could rally further, but it should be fairly short-lived, maybe about another week or so, Curry said in a telephone interview. “However, strength should be seen as a selling opportunity.”
Curry said he targets the currency to slide to the $1.3050 to $1.2850 area within a month or so.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
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