Euro Poised to Rally After Excessive Drop: Technical Analysis Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Yasuhiko Seki and Hiroko Komiya
May 7 (Bloomberg) -- The euro is set to rally against the dollar after the 16-nation currency fell to more than 5 percent below its 21-day moving average, Ueda Harlow Ltd. said, citing trading patterns.
The single currency slumped to $1.2529 yesterday, the weakest level since March 5, 2009, creating the basis for an advance to around $1.32, said Toshiya Yamauchi, a senior foreign-exchange analyst at the online currency-trading company in Tokyo. The euro has declined as much as 12 percent against the dollar this year, and is heading for its sixth monthly loss.
Given the fact that this currency pair normally moves within a 3 percent range from its 21-day moving average, we can judge that the recent decline from the trend line is excessive, Yamauchi said yesterday. This will make the euro eligible for a short-term rebound.
The euro traded at $1.2671 as of 8:41 a.m. in Tokyo, after dropping 1.5 percent yesterday to $1.2620 in New York as European Central Bank President Jean-Claude Trichet failed to ease investor concern the Greek fiscal crisis will intensify. . That was the largest slide since the collapse of global credit markets in 2008. The euro closed yesterday at 5.3 percent below the 21-day moving average of $1.3320.
The upsurge in the euro will be driven solely by technical reasons as concerns linger about contagion effects from sovereign debt problems in the euro-zone, Yamauchi said.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporters on this story: Yasuhiko Seki in Tokyo at [email protected]; Hiroko Komiya in Tokyo at [email protected]. Last Updated: May 6, 2010 19:43 EDT
MEO Price at posting:
31.0¢ Sentiment: Buy Disclosure: Held
