Euro May Rise to Three-Week High Versus Yen: Technical Analysis

By Kazumi Miura

July 27 (Bloomberg) -- The euro may extend its advance against Japan’s currency to a three-week high of 136.89 yen, Ueda Harlow Ltd. said, citing trading patterns.

The 16-nation currency is poised to make further gains after it broke through the top of a so-called ichimoku cloud last week when it climbed above 134 yen, said Toshiya Yamauchi, manager of the foreign-exchange margin trading department in Tokyo at Japan’s largest currency broker. The euro is also poised to gain after it completed a so-called golden cross when its short-term “conversion line” rose above the longer-term “baseline” on the ichimoku chart, he said.

“The euro will likely be the currency of choice, while demand for other currencies starts to falter,” Tokyo-based Yamauchi said.

The euro rose to 135.27 yen as of 8:43 a.m. in London from 134.63 in New York last week, when it gained 1.3 percent. The currency last reached 136.89 yen on July 1.

An ichimoku chart analyzes the midpoints of historic highs and lows. The conversion line is the same calculation over the past nine trading days. The baseline on the ichimoku chart is the sum of the highest high and the lowest low over the past 26 trading days. A golden cross, which some chartists see as a sign to buy, appears when a short-term moving average line rises over a longer-term average.

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

To contact the reporter on this story: Kazumi Miura in Tokyo at kmiura@bloomberg.net