Oct. 18 (Bloomberg) -- Investors may seek to buy the euro against the yen as a momentum gauge signals the 17-nation currency has dropped at a pace fast enough to encourage a rebound, according to Shinsei Bank Ltd.
The weekly and monthly stochastic oscillators are below 30, the threshold that suggests to some traders an asset’s price has fallen too quickly and is poised to reverse course, said Takako Masai, general manager of the capital markets division at Shinsei Bank in Tokyo.
“It’s natural the euro faces a correctional slide after a bounce from below 101 yen,” said Masai. “The currency has been oversold over the long term, so the euro should find buyers on dips.”
The euro rose 0.2 percent to 105.71 yen as of 9:19 a.m. in Tokyo. The common currency strengthened to as high as 107.68 yen yesterday on optimism European policy makers are speeding up efforts to contain the region’s debt crisis. It had touched 100.76 yen on Oct. 4, the lowest level since June 2001.
The euro needs to breach the 109-yen level, where its 90- day moving average stands, to reverse the long-term downward trend, Masai also predicts.
A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a period to try to predict its direction.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
--Editors: Garfield Reynolds, Naoto Hosoda
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