BLBG; Euro May Advance to 6-Month High Versus Yen: Technical Analysis
The euro may extend gains to a six- month high of 141 yen in coming weeks should the currency rise beyond so-called resistance at 137.30 yen, said Pak Lai Ng, a technical analyst at Forecast Pte Ltd. in Singapore.
The resistance level is the 200-day moving average, according to Ng. Daily momentum indicators such as the moving average convergence/divergence and the 14-day relative strength index are also showing buy signals for the euro versus the yen, Ng said. Resistance is where sell orders may be clustered.
“All of the indicators are positive,” Ng said. “The euro- yen has had a very strong up move and it’s almost there” at the 200-day moving average, he said.
Europe’s single currency rose to 136.77 yen as of 1:50 p.m. in Tokyo from 135.26 yen in New York on April 3. It earlier reached 137.07 yen, the strongest since Oct. 20. The 141 yen level was last seen on Oct. 14. The euro has strengthened 8 percent this year, following a 22 percent decline last year, the most since 1999.
The euro’s target of 141 yen is the 50 percent retracement of the fall from the July high to the January low, based on a series of numbers known as the Fibonacci sequence, Ng said.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of resistance indicates a currency may move to the next level. A failure indicates a trend may stall. Besides 50 percent, other key Fibonacci levels include 61.8 percent.
The 14-day relative strength index for the euro versus the yen, a comparison of the magnitude of gains and losses, was 70 today, according to data compiled by Bloomberg.
“The euro-yen is pushing into overbought, so this up move may take a few weeks,” Ng said. A level above 70 can signal a currency’s trend is excessive.
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 or currency.
