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Euro’s Decline Against Yen May Accelerate: Technical Analysis
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By Daniel Tilles

Aug. 12 (Bloomberg) -- The euro’s decline against the yen may persist, according to at least three technical indicators.

Parabolic Systems, which traders use to track the strength of a trend, switched to a sell signal for the euro today for the first time since July 17. The Moving Average Convergence/Divergence, or MACD, indicator shows the common European currency may be poised to trend lower. The euro also traded near its 50-day moving average of 134.51 and a close below that level may signal more declines are in store.

“Technical indicators are heading south,” said Ralf Umlauf, head of floor research at Helaba Landesbank Hessen- Thueringen in Frankfurt. “Another reason for the euro weakness of the last trading days is the weakening in stock markets. So the correlation of euro rates and risk aversion is still intact to some degree. But the correlation will not last forever.”

The euro was little changed at 135.84 yen as of 1:18 p.m. in London, after weakening to 134.09.

The Dow Jones Stoxx 600 Index of equities dropped as much as 0.8 percent, before recovering to trade up 0.2 percent. The benchmark measure declined during the past two days.

When the euro-yen’s MACD fell below its so-called signal line on June 15, the euro weakened 3.3 percent over two days.

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.

To contact the reporter on this story: Daniel Tilles in London at [e-mail]
Last Updated: August 12, 2009 08:23 EDT