By Ron Harui
Feb. 9 (Bloomberg) -- The euro may fall toward a 15-month low against the dollar after forming a so-called dead cross, said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo.
The European currency’s 50-day moving average, currently at $1.4324, dropped below its 200-day moving average of $1.4351 today, creating a dead-cross pattern. The euro slid 11.9 percent in less than two months after the last such cross occurred, dropping from $1.3998 on Sept. 10, 2008, to $1.2330 on Oct. 28, 2008.
“The dead cross is significant for the euro as it’s a rare development, signaling a long-term bearish trend,” said Soma in a Bloomberg News interview. “The target would likely be the October 2008 low.”
The euro traded at $1.3662 as of 9:28 a.m. in Tokyo from $1.3649 in New York yesterday. It touched $1.3586 on Feb. 5, the lowest level since May 20. The currency has weakened 4.6 percent against the greenback so far this year.
When a shorter-dated moving average drops through a longer-dated one, it may signal further declines. A moving average is a technical indicator that displays the average value of a security over a period of time.
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, while resistance is where there may be sell orders.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.
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