By Anchalee Worrachate - Mar 28, 2011 4:05 AM PT
The euro’s decline last week against the dollar may be part of a “failure pattern,” and the currency may drop further if it breaks below $1.3975, Commerzbank AG said, citing trading patterns.
The initial so-called support level is $1.400, which represents the euro’s 20-day moving average, Karen Jones, a London-based technical analyst at Commerzbank, wrote in an e- mailed note today. The next level to watch is $1.3975, she said.
“Failure here will instigate a slide to $1.3752/$13718 and eventually $1.3430,” she wrote. It’s not clear whether the euro’s recent move “is a consolidation or failure pattern at this stage, but we suspect the latter.”
The euro fell 0.7 percent against the dollar last week, the biggest decline since the week that ended on Jan. 7, paring its monthly gain against the U.S. currency to 1.82 percent. It traded at $1.4056 as of 12:20 p.m. in London.
A moving average is an indicator that displays the average value of a security’s price over a period of time. A close below the level suggests the asset may be on a downtrend.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. A support level on a chart is where technical analysts expect orders to buy a bond and its related securities. Resistance is where sell orders may be clustered.