Euro Close Below 86.37 Pence to Signal Drop: Technical Analysis

[Enivid]

The euro may decline to a seven-month low versus the pound upon a close below 86.37 pence, Citigroup Inc. said in a report citing technical patterns.

The euro fell 1.2 percent as of 2:38 p.m. in New York to 86.77 pence, or 0.8677 pound, descending below the currency pair’s 200-day moving average at 86.80.

“The key support level is 0.8637 which was the low from February 2009 and is the double-top neckline,” Citigroup chief technical analyst Tom Fitzpatrick in New York and strategist Shyam Devani in London wrote in a research report today. “A close below there, preferably a weekly close, would suggest a trend lower toward 0.7750.”

A double-top pattern is formed by two peaks in a price graph and the neckline is an area of support, or level where orders to buy may be clustered. A decline below a support level indicates demand to sell exceeds buying and that the trend lower may continue.

From Bloomberg News.

[JEAN]

The economic sentiment in the Eurozone got better in May, which is a clear signal that the worst of the economic crisis has already passed. Despite that, the inflation expectations dropped and the deflation risks climbed…