(Bloomberg) -- The euro may fall to a two-week low against the dollar by the end of next week, according to Tokai Tokyo Securities Co., citing trading patterns. The 16-nation currency is poised to enter a downtrend after having risen to $1.4844 on Sept. 23, the highest since Sept. 22, 2008, said Yoh Nihei, a trading group manager at Tokai Tokyo. Daily momentum indicators such as the moving average convergence/divergence chart are giving signals to sell euros for dollars, according to Nihei.
“The euro failed to rise above $1.45 in July and August,” Nihei said yesterday. “This time, that level is likely to be a strong support level.” The euro dropped to a level of so-called support at $1.4611 on Sept. 21, Nihei said. Should the euro decline below the level, the next support will be about $1.4520, which represents the 21- day moving average, according to Nihei. The last time the euro traded below $1.4520 was on Sept. 14.
Should it break that level, the euro may drop toward $1.4281, which represents a 76.4 percent Fibonacci retracement from this year’s low of $1.2457 reached on March 4, Nihei said. Support is where buy orders may be clustered. The euro was at $1.4652 as of 7:58 a.m. in Tokyo from $1.4666 in New York yesterday.
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. MACD charts can indicate whether a price shift is a change in trend or a short-term deviation by comparing moving averages based on nine-, 12- and 26-day periods. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
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