The euro may weaken to an eight-year low of about 107 yen, according to GCI Capital Co., citing trading patterns. A daily ichimoku chart of the euro versus the yen shows the short-term conversion line has fallen below the longer-term baseline and that the 16-nation currency has tumbled below the bottom of the so-called cloud, said Kazumasa Yamaoka, a senior analyst at the investment advisory company in Tokyo. “The bottom of the cloud may start serving as a resistance for the euro-yen rather than working as a support following the break of this level,” Yamaoka said. The euro traded at 110.50 yen as of 9:18 a.m. in Tokyo after falling to 109.23 yesterday, the weakest since July 6. The single currency has slumped 17 percent versus the yen this year. The euro is initially poised to drop to 107.32 yen, this year’s low touched on June 29. If it currency “fails to protect this key resistance level, it may then extend its decline to 100 yen,” Yamaoka said. The euro’s conversion line on a daily ichimoku chart is at 111.69 yen and the baseline is 111.99. The bottom of the cloud stands at about 110. Ichimoku analysis, developed by Japanese journalist Goichi Hosoda starting in the 1940s, is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. The conversion line plots the sum of the highest high and lowest low over the last nine trading days. The baseline is the same calculation over the past 26 days. A cloud refers to the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered. 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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