Oct. 24 (Bloomberg) -- The euro may strengthen 4.9 percent against the Australian dollar, according to Lloyds Bank Corporate Markets, citing trading patterns.
Investors should buy the 17-nation European currency at 1.3353 Australian dollars betting it will rise to 1.3980, Tim McCullough, a technical strategist at Lloyds in London, wrote in a note to clients. He cited so-called DeMark indicators, named after their creator Tom DeMark, which are designed to identify market tops and bottoms and are used by technical analysts for signals of when to sell or buy.
“The last two significant turning points in euro- Australian dollar were both identified by short-term exhaustion patterns,” McCullough wrote in the note dated today. “The same patterns now indicate that a new rally is imminent, with a relatively attractive risk-reward profile.”
The euro weakened 0.5 percent to 1.3331 Australian dollars at 11:14 a.m. London time. The last time it traded at 1.3980 was on Oct. 4.
The level of 1.3980 Australian dollars per euro represents a resistance level from Oct. 5, McCullough wrote. Investors should exit the trade if the Australian dollar strengthens to 1.3238 per euro, he said.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
--Editors: Nicholas Reynolds, Matthew Brown
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