The Philippine peso may weaken to a seven-month low against the yen as a technical gauge signaled volatility in the Southeast Asian currency will increase, according to Mitsubishi UFJ Morgan Stanley Securities Co.
A widening in the exchange rate’s Bollinger band, which traders use to judge support and resistance levels based on a currency’s moving average, suggests the peso will drop 3.8 percent to 1.807 yen in about a month, said Minoru Shioiri, chief manager of foreign-exchange trading at Mitsubishi UFJ. The peso declined 0.8 percent to 1.878 yen as of 2:20 p.m. in Manila, according to data compiled by Bloomberg.
The peso is also approaching a key level on a Fibonacci chart, which if touched, shows the currency may erase its gain from a low in November to a high in April, Tokyo-based Shioiri said. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.
“The direction is for the peso to move lower at a gradual pace against the yen,” Shioiri said. “The yen itself looks strong across the board and emerging currencies don’t. That also supports the technical view.” The peso has been trading near the lower line of its Bollinger band for about a week and the band itself began to widen, a signal for the peso to fall, he added.
All 26 currencies of developing nations tracked by Bloomberg have dropped against the yen over the past three months.
Traders buy or sell a security when prices move closer toward or break the upper or lower Bollinger bands, depending on their individual thesis. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.