Euro May Decline to 10-Week Low Against Yen: Technical Analysis

April 28 (Bloomberg) -- The euro may decline to a 10-week low against the yen after falling below so-called support at 126.42, said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co., citing trading patterns.

Support at 126.42 yen represents the neckline of a so- called “head-and-shoulders” pattern, which was completed when the euro closed at 126.14 yen yesterday, Tokyo-based Soma said. A head and shoulders is formed when a currency makes three consecutive peaks, with the middle being the highest. The neckline is drawn across the base of the three peaks.

“The euro-yen has broken below the neckline of the head and shoulders, which means it’ll probably go down more,” Soma said. “The target is around 115.38 yen.”

Europe’s single currency dropped to 124.59 yen as of 7:39 a.m. in London from 126.14 yen in New York yesterday. It earlier reached 124.54 yen, the lowest level since March 12. The 115.38 yen level was last seen on Feb. 12, according to data compiled by Bloomberg.

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 and resistance is where there may be sell orders.

FOREX-Yen jumps on US bank concerns, flu fears

LONDON, April 28 (Reuters) - The yen jumped to a seven-week high against the euro and a one-month peak against the dollar on Tuesday, on a report that regulators have told Bank of America (BAC.N) and Citigroup (C.N) they may need to raise more capital.

The yen extended gains as the report intensified investors' aversion to risk, already heightened by fears of a flu pandemic hampering any recovery in the global economy.

Higher yielding currencies such as the Australian and New Zealand dollars came under pressure.

The Wall Street Journal said regulators have told Citigroup and Bank of America they may need to raise more capital based on early results of government stress tests on banks.

The results of these tests are set to be unveiled on May 4.

"All this results in a higher risk perception, which is why we are seeing a stronger yen," Commerzbank currency strategist in Frankfurt Lutz Karpowitz said.

At 0755 GMT, the dollar slid 0.8 percent against the yen to 95.87 yen , just shy of an earlier one-month low of 95.63.

The euro lost 0.8 percent against the Japanese currency to 124.81 yen , having hit a seven-week low around 124.38 yen. The yen's gains were helped by steep falls in equities, with European stocks tumbling 2.3 percent .FTEU3.

Against the dollar, the euro was steady at $1.3020 .

The Australian dollar fell 1.2 percent against its U.S. counterpart , while the New Zealand dollar lost 1.6 percent .

FOREX-Yen jumps on US bank concerns, flu fears

LONDON, April 28 (Reuters) - The yen jumped to a seven-week high against the euro and a one-month peak against the dollar on Tuesday, on a report that regulators have told Bank of America (BAC.N) and Citigroup (C.N) they may need to raise more capital.

The yen extended gains as the report intensified investors' aversion to risk, already heightened by fears of a flu pandemic hampering any recovery in the global economy.

Higher yielding currencies such as the Australian and New Zealand dollars came under pressure.

The Wall Street Journal said regulators have told Citigroup and Bank of America they may need to raise more capital based on early results of government stress tests on banks.

The results of these tests are set to be unveiled on May 4.

"All this results in a higher risk perception, which is why we are seeing a stronger yen," Commerzbank currency strategist in Frankfurt Lutz Karpowitz said.

At 0755 GMT, the dollar slid 0.8 percent against the yen to 95.87 yen , just shy of an earlier one-month low of 95.63.

The euro lost 0.8 percent against the Japanese currency to 124.81 yen , having hit a seven-week low around 124.38 yen. The yen's gains were helped by steep falls in equities, with European stocks tumbling 2.3 percent .FTEU3.

Against the dollar, the euro was steady at $1.3020 .

The Australian dollar fell 1.2 percent against its U.S. counterpart , while the New Zealand dollar lost 1.6 percent .

Market Commentary

MARKET COMMENTARY ON 28TH APRIL 2009

GBP/USD closed lower on Monday due to profit taking as it extends last week's trading range. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning neutral hinting that a short-term low might be in or is near. Closes above the 10-day moving average crossing at 1.4720 are needed to confirm that a short-term low has been posted. If June extends the decline off April's high, the reaction low crossing at 1.4130 is the next downside target. First resistance is last Friday's high crossing at 1.4750. Second resistance is April's high crossing at 1.5045. First support is last week's low crossing at 1.4410. Second support is the reaction low crossing at 1.4130.

EUR/USD closed lower on Monday as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near-term. If June extends last week's rally, the reaction high crossing at 1.3385 is the next upside target. Closes below last week's low would open the door for a possible test of March's low crossing at 1.2660.

USD/CHF closed sharply lower on Monday due to profit taking as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near-term. If June extends last week's rally, the reaction high crossing is the next upside target.

USD/CAD posted an inside day with a lower close on Monday as it consolidates some of last week's rally but remains above the 10-day moving average. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near-term. If June extends last week's rally, April's high crossing is the next upside target. Closes below the 20-day moving average crossing at would temper the friendly outlook.

USD/JPY closed higher on Monday as it extends this month's decline. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends this month's rally, the reaction high crossing at 99.70 is the next upside target. Closes below the 20-day moving average crossing 95.20 would signal that a short-term top has been posted.