Oct. 6 (Bloomberg) -- The euro’s rise above yesterday’s intraday high against the dollar may prove to be a “bullish- outside day” before the shared currency resumes a depreciating trend, according to Brown Brothers Harriman & Co.
The 17-nation currency, which has dropped 6.6 percent since August, is poised to rally for three or four days if it closes above the high reached yesterday, said Marc Chandler, global head of currency strategy at Brown Brothers in New York. The euro strengthened today after the European Central Bank said it would reintroduce bank loans in an effort to buoy the region’s crisis-ridden economy.
“Because we finished the third quarter with such an extended position, this is going to be the early fourth-quarter short-covering rally,” Chandler said in a telephone interview. “We took out yesterday’s lows and now we’re holding above yesterday’s highs. As long as we close above there, this is going to look like a key reversal.”
The euro rose 0.6 percent to $1.3434 at 2:50 p.m. in New York, from $1.3348 yesterday, when it climbed to as high as $1.3384. The currency fell to as low as $1.3242, below yesterday’s intraday low of $1.3260.
The currency has faltered this year as concern that a Greek default would lead to similar consequences in other struggling member nations curtailed investor appetite.
The euro may appreciate to its 20-day moving average at $1.3566, Chandler said, before resuming its weakening trend. He forecasts the shared currency will end the year at $1.29.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
Futures traders increased bets the euro would fall versus the dollar to net 82,473 contracts in the week ended Sept. 27, the most since June 2010, according to Commodity Futures Trading Commission data.
--Editors: Dave Liedtka, Paul Cox
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