The euro will fall below an almost seven-year low after breaching a level of so-called technical support this week on investor concern European leaders will fail to tackle the debt crisis, High Frequency Economics predicted.
The company expects the 17-nation currency to weaken past $1.1967 this week. From there it will reach its 2005 “nadir,” Carl Weinberg, chief economist in Valhalla, New York, wrote in a note to clients yesterday. The euro touched $1.1640 on Nov. 15, 2005, according to Bloomberg data, 5.4 percent below its current level.
European Union leaders agreed at a summit last month to use the region’s bailout funds to recapitalize Spain’s ailing lenders and to set up a banking supervisory body.
“The euro-phoria that emerged after the June 28 summit has been replaced by gloom,” Weinberg wrote in the note. “Investors have lost confidence in the capacity of the political process to generate executable and appropriate solutions to the banking and financial crises.”
The euro was little changed at $1.2295 at 8:21 a.m. London time today.
European finance ministers are gathering in Brussels for the second day of discussions on crisis-fighting measures adopted by heads of government at last month’s summit.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index. A support level is an area on a price graph where economists anticipate orders to buy a security.
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