(Bloomberg) -- The euro may gain versus the dollar to $1.4719, the strongest since December, should the currency rise above so-called resistance at $1.4338, according to Bank of Tokyo-Mitsubishi UFJ Ltd. The 16-nation currency already broke above the descending trend line on a so-called triangle pattern, strengthening beyond the 76.4 percent retracement of the slump from the Dec. 18 high to the March 4 low, said Masashi Hashimoto, Tokyo-based senior analyst at the unit of Japan’s largest banking group. The triangle is formed by the descending trend line, which connects the highs of June 3 and July 1, and by an ascending trend line, which connects the lows of June 16 and July 8, he said. “Rising pressure will increase if the euro gains above the June 3 high of $1.4338,” Hashimoto said. “The currency has broken above the triangle. It has also gone through the 76.4 percent Fibonacci retracement level.”
The euro rose to $1.4158 as of 7:54 a.m. in Tokyo from $1.4143 in New York yesterday, when it fell 0.5 percent. The currency this week climbed above $1.4185, the 76.4 percent retrenchment of the slump from the Dec. 18 high of $1.4719 to the March 4 low of $1.2457, based on a series of numbers known as the Fibonacci sequence.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance or below support indicates a currency may move to the next level. Resistance is an area where sell orders may be clustered. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
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