Euro May Decline to 3-Month Low Versus Yen: Technical Analysis

By Yasuhiko Seki

Nov. 3 (Bloomberg) -- The euro may decline against Japan’s currency, approaching a three-month low, Bank of Tokyo- Mitsubishi UFJ Ltd. said, citing trading patterns.

The 16-nation currency on Oct. 30 completed its first weekly loss in a month against the yen, sliding below the 13-and 26-week moving averages, a sign the euro will drop further, said Masashi Hashimoto, a senior analyst in Tokyo at the unit of Japan’s biggest publicly traded bank. Indicators such as the stochastic oscillator　and moving average convergence/divergence, also signal investors should sell the euro, he said.

“The key to ascertaining the trend for the following months is whether the euro can recover to 134 yen,” Hashimoto said. “A failure to reach the level may create opportunities for further declines, possibly pushing the currency toward the 52-week moving average or the bottom line of Bollinger bands.”

The euro traded at 133.55 yen as of 8:54 a.m. in Tokyo, from 133.32 yen yesterday in New York. It reached 129.05 yen on Oct. 2, the lowest level since July 13, when the single currency reached 128.01. The currency’s 52-week moving average stood at 129.09 yen at the end of last week and the bottom-line of Bollinger bands was at 128.94.

Bollinger bands, developed by analyst John Bollinger, are based on historical price swings. The bands narrow and widen to reflect the size of those moves, and represent possible support and resistance levels. 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.

A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall.

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

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net