By Daniel Tilles Jan. 28 (Bloomberg) -- The euro may weaken more than 7 percent against the pound to 80.10 pence by mid-May, MIG Bank SA said, citing technical indicators. The single European currency might initially depreciate to 81.70 pence, the 50 percent Fibonacci retracement of the 2007- 2008 euro “bull market,” said Paul Day, chief market analyst at MIG in Neuchatel, Switzerland. A “potential ABC Elliott Wave correction” from the 98.03 pence peak of December 2008 signals an extension of the trend, he said. The euro was at 86.28 pence as of 12:48 p.m. in London, down 0.6 percent from yesterday. “If such a move were to play out at a similar speed to wave A, then the decline to 80.10 pence per euro would occur by the middle of May,” he said in an interview. Weekly technical charts for the TD Combo and TD Sequential indicators, which seek to anticipate “trend exhaustion,” show that the 94.12 pence level at which the euro traded on Oct. 13 is an “important top,” according to Day. The indicators signal “critical TDST support” at 85.23 pence, and a “break of this level would suggest a strong period of downside momentum is being played out,” he said. MIG’s “early” 2010 target for the common currency against the pound has been 85.12 pence to 84.50 pence, he said. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Elliott Wave Theory, developed by the accountant Ralph Nelson Elliott during the Great Depression, concluded that market swings, or waves, follow a predictable eight-wave structure consisting of a five-wave advance or decline in the direction of the larger trend, followed by a three-wave so- called corrective structure in the opposite direction. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a bond, commodity, currency or index. To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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