Euro May Rise to 15-Month High of $1.5285: Technical Analysis

By Ron Harui

Nov. 17 (Bloomberg) -- The euro may rise to a 15-month high of $1.5285 should it advance beyond so-called resistance at $1.5063, according to Bank of Tokyo-Mitsubishi UFJ Ltd., citing trading patterns.

Resistance at $1.5063 represents the Oct. 26 high, which the currency will probably strengthen toward in the next two weeks, said Masashi Hashimoto, a senior analyst in Tokyo at the unit of Japan’s biggest publicly traded bank. The euro’s close last week above the four-week moving average of $1.4869 and the rising trend in other indicators such as the 13-week moving average signal the euro may gain further, Hashimoto said.

“Positive signals are outweighing negative ones when you compare them at this moment,” Hashimoto said in a Bloomberg interview. “Hence, the euro is likely to go up.”

The euro traded at $1.4970 as of 7:52 a.m. in Tokyo unchanged from New York yesterday. Europe’s currency has risen 7.1 percent versus the dollar this year.

Should the euro breach the $1.5063 resistance level, the currency is likely to extend gains to next resistance at $1.5163 and then to $1.5285, Hashimoto said.

The $1.5163 level is 76.4 percent retracement of the decline from the July 2008 high of $1.6038 to the October 2008 low of $1.2330, based on a series of numbers known as the Fibonacci sequence. The $1.5285 level is the low set on May 8, 2008, according to data compiled by Bloomberg. Support typically becomes resistance when it is broken.

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

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance is an area where sell orders may be clustered, and support is an area where there may be buy orders. A break above resistance or below support indicates a currency may move to the next level.

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