Dollar Seen Strengthening 9% to 86.85 Yen on Fibonacci: Technical Analysis

The dollar may strengthen more than 9 percent against the yen should it breach a key resistance level, Commerzbank AG said, citing technical indicators.

“Dollar-yen last week rallied higher and starts this week at six-month highs facing the 79.93-80.25 pivot,” Karen Jones, London-based head of fixed-income, commodity and currency technical analysis, wrote in an e-mailed report today.

That area represents the 23.6 percent Fibonacci retracement of the move down from the 2010 peak, the November 2010 low and the 1995 low, she wrote.

The dollar was little changed at 79.59 yen at 11:09 a.m. London time, after reaching 79.89 yen earlier, the strongest level since Aug. 4.

“Longer term, we are bullish” on the dollar, Jones said. “We target 86.85, the 23.6 percent retracement of the move down from 2007.”

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index. A resistance level is an area on a chart where analysts anticipate orders to sell a currency to be grouped. A pivot is an area of the chart that may offer both support and resistance.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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