Euro Likely to `Test' $1.3840 Support on Charts, Forecast Says

By Ron Harui

Sept. 9 (Bloomberg) -- The euro is likely to ``test'' so- called support at $1.3840 against the dollar this week, said Pak Lai Ng, a technical analyst at Forecast Pte in Singapore, citing charts that predict price movements.

Support at $1.3840 is a 50 percent retracement of the euro's rise from the November 2005 low of $1.1640 to the all- time high of $1.6038 in July, based on a series of numbers known as the Fibonacci sequence. The $1.3840 level also represents an ascending trend line that began in February 2002, which is extrapolated out to today, Ng said.

``The currency looks like it's still on a downtrend,'' Ng said, citing momentum indicators such as the moving average convergence-divergence chart. ``They're all negative.''

The euro fell to $1.4059 as of 12:01 p.m. in Tokyo from $1.4128 late in New York yesterday. It earlier reached $1.4047, the lowest since Oct. 9, 2007. The currency has dropped 12.4 percent since its record high on July 15.

The daily MACD chart is still signaling to sell the euro, Ng said. 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.

Fibonacci analysis is a mathematical formula based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of one indicates a currency may move to the next. A failure suggests a trend may stall. Other Fibonacci points include 61.8 percent and 76.4 percent.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance is where sell orders may be clustered, while support is where there may be buy orders.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net