Euro May Extend Gains to 1-1/2 Month High: Technical Analysis

By Ron Harui

March 17 (Bloomberg) -- The euro may extend gains to a 1- 1/2 month high of $1.3321, based on trading patterns, said Bank of Tokyo-Mitsubishi UFJ Ltd.

The currency’s advance above so-called resistance levels at the five-day moving average of $1.2928 and the 21-day moving average of $1.2724 suggests the euro may be set for an extended gain, said Masashi Hashimoto, a currency analyst in Tokyo for the bank. Other technical indicators such as so-called ichimoku charts signal the euro’s bias has shifted to the “upside,” he said. Resistance is where sell orders may be clustered. An ichimoku chart analyzes the midpoints of historic highs and lows.

“The trend has changed and that means we can probably expect more currency gains,” Hashimoto said. “The euro may approach resistance between $1.3000 and $1.3100,” he said, citing levels including the 90-day moving average of $1.3088.

The euro rose to $1.2990 as of 2:41 p.m. in Tokyo from $1.2968 late in New York yesterday, when it reached $1.3072, the highest level since Feb. 10. The currency gained 2.2 percent last week, the first weekly increase since early February.

The 16-nation currency would likely extend its rally to $1.3321 if the euro breaches resistance between $1.3000 and $1.3100, Hashimoto said. The euro last reached $1.3321 on Jan. 28, Bloomberg data show.
A gain to $1.3321 would represent a 38.2 percent retracement of the euro’s fall from the Dec. 18 high of $1.4719 to the March 4 low of $1.2457, according to a series of numbers known as the Fibonacci sequence.
Fibonacci analysis is a mathematical formula based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of one indicates a currency may move to the next. A failure suggests a trend may stall. Other Fibonacci points include 61.8 percent.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net
Last Updated: March 17, 2009 02:05 EDT