Euro to Fall to Six-Week Low Versus Dollar: Technical Analysis

(Bloomberg) -- The euro will probably fall to a six- week low versus the dollar after failing to exceed resistance levels last week, Citigroup Inc. technical analysts wrote. The 16-nation currency halted its advance on July 1 at $1.4201, stopping at the 76.4 percent Fibonacci retracement of its decline from the six-month high of $1.4338 set on June 3, a Citigroup chart shows. The euro depreciated for three straight days after failing to break above the resistance level, which also coincided with the currency’s downward trend since reaching its record high on July 15, 2008, according to the chart.“This is a bearish setup in the short term,” Citigroup technical analysts Tom Fitzpatrick in New York and Shyam Devani in London wrote today in a note to clients.

The euro will probably fall to $1.3748 to a support level near the 55-day moving average, and a break even lower may lead to declines toward the 200-day moving average around $1.33, the strategists wrote.The euro fell 0.4 percent to $1.3926 as of 11:17 a.m. in New York, the longest stretch of declines since the five-day losing streak ended on April 20. Europe’s shared currency has depreciated 13 percent against the greenback since reaching its record high of $1.6038 last July.In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance is an area where sell orders may be clustered, and support is an area where there may be buy orders. A break above resistance or below support indicates a currency may move to the next level.