Euro May Rise as Recent Losses Deemed Excessive, JPMorgan Says

By Kosuke Goto

Aug. 21 (Bloomberg) -- The euro will rebound against the dollar as recent losses are excessive, said Tohru Sasaki, chief currency strategist at JPMorgan Chase & Co.

The euro's 14-day relative strength index was 25.5 versus the dollar today. A level below 30 signals the currency's losses may reverse. Futures traders raised their bets on a euro fall to the highest amount since May, positions that are often used as a contrary indicator.

``The euro's decline against the dollar was a bit too fast,'' said Tokyo-based Sasaki at the third-largest U.S. bank. ``Investors have also piled up huge short-euro positions against the dollar. The markets are likely to correct those excessive positions.'' A short position is one that bets on a currency falling.

Europe's single currency was at $1.4776 as of 11:55 a.m. in Tokyo from $1.4747 in New York yesterday. It fell to $1.4631 on Aug. 19, the lowest level since Feb. 20.

The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain -- so-called net shorts -- rose to 19,427 on Aug. 12, the highest since May, figures from the Washington-based Commodity Futures Trading Commission showed on Aug. 15.

The euro's 14-day stochastic oscillator versus the dollar was 14.4 today, according to Bloomberg data. A level below 20 suggests the currency has fallen too fast.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net