By Theresa Barraclough
Oct. 2 (Bloomberg) -- The dollar may reach a three-week high of 1.0505 Swiss francs should it break above so-called resistance at 1.0447 francs, BNP Paribas SA said, citing trading patterns.
Resistance at 1.0447 is the 50 percent retracement of the decline from a Sept. 1 high of 1.0706 to the Sept. 23 low of 1.0189, based on a series of numbers known as the Fibonacci sequence, BNP said. Resistance is where there may be sell orders.
The dollar “still looks to be correcting its September sell-off,” a team of analysts led by Hans-Guenter Redeker, global head of currency strategy at BNP Paribas in London, wrote in a report dated yesterday. “A sustained rise above 1.0450 would open 1.0505 before the correction is complete.”
The dollar climbed for a fifth day to 1.0421 Swiss francs as of 10:37 a.m. in Tokyo, from 1.0407 francs yesterday in New York. The currency touched 1.0189 francs on Sept. 23, the weakest level since July 2008. Analysts in a Bloomberg News survey say the dollar will strengthen to 1.05 francs by year-end, and 1.06 francs by the end of March.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance or below support indicates a currency may move to the next level. Besides the 50 percent threshold, other key Fibonacci levels include 61.8 percent.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support is a level where buy orders may be clustered.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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