Dollar's Key Support Signals a 6% Advance Against Yen: Technical Analysis
The dollar will likely hold “key support” at 88.50 yen and rise 6 percent to its strongest since August, Standard Chartered Plc said, citing trading patterns.
The greenback will gain to 95 yen, the top of a range it has held since December, said Robert Minikin, a senior foreign- exchange strategist in Hong Kong. It traded at 94.99 yen on May 4, the strongest since August 24. The dollar will find initial support at 89.20 yen and then 88.50 yen, near the March 3 close that was the lowest closing level this year.
“Technically we think the risk-reward favors buying dollar-yen here for a move back to the top of the range,” said Minikin. “We’re using key closing lows at the foot of the range to identify key support levels.”
The dollar traded at 89.33 yen as of 10:37 a.m. in Tokyo from 89.37 yesterday in New York, when it fell as low as 89.07, the least since May 21. It is forecast to rebound to 97 yen by year-end, according to the median estimate of economists complied by Bloomberg, after weakening 2.1 percent this month against Japan’s currency.
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 where buy orders may be grouped, and resistance is a level where sell orders may be clustered.