LONDON (Reuters) - The euro’s plunge against the dollar is not quite off the charts, but analysts of price patterns and historical trends reckon it’s poised to threaten barriers that have held for decades.
Pummelled on one side by the start of a 1 trillion-euro money-printing scheme by the European Central Bank this week, and on the other by expectations of a hike in U.S. interest rates, the euro fell as low as $1.0559 on Wednesday.
For chartists, this set off alarm bells.
Karen Jones, head of FICC technical analysis research at Commerzbank, said charts describing a 30-year uptrend in euro/dollar, beginning with a low of $0.5633 in 1985, 14 years before the euro was actually introduced, and passing through its actual low of $0.8225 of October 2000, would today touch $1.0573.
The euro last traded right on the trendline at $1.0573.
“It’s a 30-year uptrend. It’s very important. Essentially, it should hold the first test but where we close is very important and below there ... I’ve got nothing until parity,” Jones said, adding the test would be Friday’s close.
Several banks are forecasting the euro, which has fallen 12 percent against the dollar this year, will fall to parity with the U.S. currency or lower.
Jones says a monthly chart of the dollar index forms a symmetrical triangle, suggesting the index could rise a further 8 percent from current levels.
“It’s the upside measured target for the entire dollar bull move, which suggest to me that when we get to parity or $0.99 we should stop,” she said.
Anders Soderberg, technical analyst at SEB, said the 78.6 percent retracement of the euro’s move from its 2000 low to its 2008 peak would take it to $0.99.
Charaliambos Pissouros, senior technical analyst at IronFX, said parity should be hit “in the not-too-distant future”, though there may be pauses or minor corrections on the way.
The first could be at $1.05, a level last seen in 2003 that he called psychologically important. After that, the next significant levels were around $1.0180, the highs of November and July 2002.
“It was broken to the upside and was never tested again, so the market may come to see it as another support level,” Puissouros said.
Below parity, there may be a pause at $0.96, he said, though it was too early to predict a reversal.
“I will start discussing a trend reversal when I see my chart printing higher peaks and higher troughs and if I have a story that supports the technical picture. For now, the downtrend continues.”
Additional reporting by Anirban Nag; Editing by Larry King