Dollar May Extend Slide Against Yen, JPMorgan Says: Technical Analysis
July 1 (Bloomberg) -- Bloomberg's Gigi Stone reports on the performance of the U.S. equity market today. Stocks, commodities and the dollar slumped as data on manufacturing, jobless claims and home sales fueled concern the economic recovery is faltering. (Source: Bloomberg)
The dollar may slide further beyond a seven-month low against the yen if the Standard & Poor’s 500 continues to fall, according to JPMorgan Chase & Co.
The dollar’s “violation of key support” at the 89.25- 88.95 yen level earlier this week implies “a breakdown is underway which should allow for an extension of the current decline,” Niall O’Connor, a technical analyst in New York at the second-largest U.S. bank by assets, wrote in a note yesterday. Support refers to areas on charts where buy orders are clustered.
The dollar yesterday fell 0.9 percent against the yen to 87.60 at in New York. It touched 86.97 yen, its weakest level since Dec. 2.
“The story is really what’s going on in equities,” O’Connor said in a telephone interview. “Even though we’ve bounced off the lows, equities have had a rough day.”
The S&P 500 touched 1,010.91, the lowest intraday level since Sept. 4, before closing at 1,027.31 in New York. The break below the 1040 level “suggests that risk sentiment will remain on the defensive,” according to the note.
Japan’s currency usually outperforms the dollar when U.S. stocks decline, O’Connor said, and continued weakness in equities could drive the dollar lower.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Alex Kowalski in New York at Akowalski13@bloomberg.net
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