By Candice Zachariahs
Dec. 8 (Bloomberg) -- The euro may have a “long-term, multi-month” drop toward its 2008 low, falling below support at $1.4625, BNP Paribas SA said, citing trading patterns.
The single currency declined 1.3 percent on Dec. 4, the most since June 15, triggering a break of the currency’s uptrend in March, Andrew Chaveriat, a technical analyst at BNP Paribas in New York, wrote in a research note yesterday.
“Euro-dollar is in position to have completed its March rally,” he wrote. A drop below $1.4625 “would confirm a major top is in place and that euro-dollar is at the early stages of a long-term, multi-month decline potentially re- testing or breaking the $1.2330 October 2008 cycle low.”
A decline through $1.4625, near the November low, would confirm a top at $1.5144, which the euro touched Nov. 25, the bank said. That level is also near the 76.4 percent Fibonacci retracement of the euro’s fall from its all-time high of $1.6038 in July 2008 to $1.2330 in October of last year.
The euro, which has gained 6.2 percent against the dollar this year and 17 percent since March, traded at $1.4840 as of 9:34 a.m. in Tokyo from $1.4827 in New York.
Support levels are areas on a chart where orders to buy a currency versus a counterpart may be clustered, and a break through those levels typically signals further declines.
Fibonacci charts are based on the theory that securities tend to rise or fall by specific percentages after reaching a new high or low.
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 reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Last Updated: December 7, 2009 19:44 EST
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