Dollar to End Drop at 81 Yen, Rally to 84 on Ichimoku: Technical Analysis

The dollar may stop declining at about 81 yen before it rebounds toward 84 yen, according to Citigroup Inc., citing trading patterns.

The dollar’s target is 81.29 yen, according to the Ichimoku chart’s “V pattern,” which is based on the idea that a currency will decline by twice the amount of the preceding gain, said Osamu Takashima, chief currency strategist at Citigroup in Tokyo. After the dollar rose to 94.99 yen on May 4 from 88.14 yen on March 4, the currency may fall from the high by double the size of the advance to 81.29 yen, Takashima said.

“The dollar’s slide is losing momentum from a medium-term viewpoint,” he said. “It has taken 26 months for the currency to fall by the same amount as the previous nine-month decline.”

After reaching 81.29 yen, the dollar may rebound to yesterday’s 21-day moving average of 84.12 yen, he said.

The dollar is currently trading near an initial target of 82.29 yen based on the Ichimoku chart’s “N pattern,” which is formed when a price’s decline matches a slump of similar magnitude that occurred before a brief rebound, Takashima said.

The U.S. currency fell from a June 2007 high of 124.13 yen to a March 2008 low of 95.76 yen, before advancing to 110.66 yen in August 2008. A slide by the same amount -- 28.37 yen -- would take the currency to 82.29 yen, Takashima said.

The greenback traded at 82.30 yen as of 12:28 p.m. in Tokyo, after reaching as low as 82.11 yesterday, the least since May 1995 and below the level reached on Sept. 15 when Japan intervened for the first time in six years.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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