Euro May Decline to Two-Year Low on Channel: Technical Analysis

By Sharon Chen and Shigeki Nozawa - Sep 5, 2012 9:46 AM GMT+0800

The euro may decline to a two-year low after it reaches the upper range of its so-called downward channel, Forecast Pte said, citing trading patterns.

The 17-nation currency is in the channel, which has a top line demarcated by highs of $1.4549 on Aug. 29, 2011 and $1.4247 on Oct. 27, said Pak Lai Ng, a Singapore-based technical analyst at Forecast. The bottom line of the channel runs through the low of $1.3146 on Oct. 4. The single currency has never climbed above the channel, and its upper limit was about $1.2674 today, according to data compiled by Bloomberg.
The euro dropped 0.3 percent to $1.2535 as of 10:38 a.m. in Tokyo from the close in New York yesterday. Europe’s single currency has risen 4 percent since it touched $1.2043 on July 24, the lowest level since June 2010.

The euro is “only correcting up,” Ng said. “After the correction, it should head back down again to retest” the July 24 low, he said.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.


To contact the reporters on this story: Sharon Chen in Singapore at schen462@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net