Yen May Dip to 4 1/2-Year Low, JPMorgan Says: Technical Analysis

The yen may decline to its weakest level against the dollar in more than four and a half years after breaking a key level of support, according to JPMorgan Chase & Co.

The Japanese currency will face a test at 103.50 per dollar after breaching the 103-to-103.10 area on May 17, according to Niall O’Connor, a technical analyst at JPMorgan in New York. If the yen declines past that support level, it may target 105.50, the 61.8 percent Fibonacci retracement of the currency’s 2007 high, O’Connor said. That would be its weakest level since October 2008.

“It could pause a little bit near-term, but the bottom line is that the dollar-yen breakout is still holding,” O’Connor said in a telephone interview. “The jury is still out on the 103 level, but the overall upside bias is still intact.”

The yen increased 0.9 percent to 102.28 per dollar at 2:23 p.m. in New York after reaching 101.97. The currency gained 0.5 percent to 131.85 per euro.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered, and support is an area where there may be buy orders.

Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, known as Fibonacci, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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