The yen’s breach of a key trading level opens the way for it to weaken to an almost one-month low versus the dollar, according to JPMorgan Chase & Co., citing technical analysis.
After weakening through support at 98.65 yesterday, the Japanese currency will test 99.10 before falling to 99.97, according to Niall O’Connor, a New York-based technical analyst at JPMorgan. That would be the lowest since July 25.
“The price action over the last few days has been constructive and suggests that we can see a test of 99.10, if not the 100 area,” O’Connor said in a telephone interview. “There’s potential to extend in dollar-yen.”
The yen’s current downtrend was confirmed after it failed to strengthen through the area from 96.40 to 97 on Aug. 20, according to O’Connor. It touched a seven-week high of 95.81 on Aug. 8.
The Japanese currency has weakened 9 percent this year, the worst performer after Australia’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
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.
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