By Candice Zachariahs
Nov. 7 (Bloomberg) -- Investors should sell the euro against the yen if the currency weakens further, as it may decline as much as 8 percent, RBC Capital Markets said, citing technical charts.
The 15-nation euro is heading for a weekly loss versus Japan's currency after dropping yesterday the most in almost two weeks as the European Central Bank cut its main refinancing rate by a half-percentage point to 3.25 percent. ECB President Jean- Claude Trichet said more reductions may follow as the economy has ``weakened significantly.''
The euro declined 0.5 percent to 123.72 yen as of 9:22 a.m. in Tokyo after dropping 2.1 percent yesterday. It has fallen 26 percent in the past three months, and reached 113.64 yen on Oct. 27, the weakest level since May 2002.
``A daily close below support at 123.41 would affirm our bearish view,'' George Davis, chief technical analyst in Toronto at RBC Capital, a unit of Canada's largest bank, wrote in a note yesterday. ``This development would then favor a deeper sell-off to 119.50, followed by the cyclical low at 113.74.''
Investors should purchase the euro if it declines below 123.41 yen and exit the trade if it rises to 141.85, RBC said. Support is a level where buying is expected to outweigh selling.
The International Monetary Fund lowered its forecast for global growth today and predicted the first simultaneous recessions in the U.S., Japan and the euro region in the post- World War II era. Global growth will be 2.2 percent next year, the IMF said yesterday, down from an October forecast for a 3 percent increase.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
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