Euro an 'Ugly Duckling' Story: Charts
The euro has taken a beating in the past few weeks as concerns over the fiscal stability of the euro zone cause investors to sell the currency. But Royce Tostrams, technical analyst at Tostrams Groep, told CNBC on Friday that the euro is an 'ugly duckling' story and has both short- and long-term potential.
"The euro will mature — maybe not into the most beautiful bird in the world, but at least into a graceful swan," Tostrams said. "The euro has hit very strong horizontal support (at) $1.23/4."
This support level has in the past triggered major buyers into the market, he added.
The euro will "jump around above $1.23, where short-covering could trigger a rally, maybe towards $1.309," Tostrams said. "Now there is some reason to buy the euro, at least from a short-term perspective. If you're short euro, you should cover your shorts. I've been long since yesterday afternoon."
"I still see in the euro/yen a pattern of falling peaks, confirming selling pressure," Tostrams said. "However, there are some signs of a trend reversal in the euro/yen."
"The very, very ultra-short, steep downtrend has been broken in the past 24 hours, suggesting some buying into the market. So the euro after that has been very, very oversold, so this also could trigger some recovery," he added.
The dollar/yen has broken out of its falling trend, according to Tostrams. He said he sees the pattern for dollar/yen as "mildly bullish" and has a first target of 98 yen.
"Be on the low side of the dollar, but only by on dips," he advised.
- For More European News
- For More on Where the FX Markets Are Trading