Euro-Swedish Krona Chart Shows Drop to 9.10 Is Likely, UBS Says

The euro may drop to a four-month low of 9.10 Swedish krona in three weeks, according to price charts, said Tow Keong Su, technical analyst at UBS AG in Singapore.

The currency pair is likely to fall further after breaking below a trend line connecting the Nov. 17, 2005, high of 9.6565 and the April 3 high of 9.3827. Momentum indicators such as moving average convergence/divergence, the relative strength index and stochastics also suggest declines. The stokie, as Sweden's currency is known, surged the most in five years yesterday after the Riksbank said it will raise interest rates more than it previously predicted this year.

``The euro-stokie broke below the trend line, so for the time being it's going to trade lower,'' Su said. ``Momentum indicators are also sharply lower.''

The Swedish krona was quoted at 9.2665 per euro at 6:32 a.m. in London from 9.2608 late yesterday. Support at 9.10 is near the euro-Swedish krona's May 2 low of 9.1194, Su said. Support is a level where buy orders may be clustered.

Sweden's currency jumped 1.7 percent yesterday after the central bank raised rates by a quarter percent to 3.5 percent and said it will increase borrowing costs to 4 percent this year, higher than its previous forecast of 3.5 percent.

The so-called moving average convergence/divergence subtracts a security's average price over the past 26 days from its average price over the past 12 days, giving less weight to older data.

A relative strength index compares the magnitude of gains with the magnitude of losses over a given period. Stochastics measure the price of a security relative to its highs and lows during a particular period.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

source;bloomberg.com