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Won’s Bollinger Band Predicts Gain Over Yen: Technical Analysis

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Jan. 12 (Bloomberg) -- South Korea’s won may strengthen 4.8 percent against the yen over the next two months, according to Mitsubishi UFJ Morgan Stanley Securities Co., citing a technical indicator known as the Bollinger band.

The Korean currency may advance to 12.84 against the yen, the highest since June, said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ. 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 won will extend its 2.5 percent rally against the yen so far this year, he said.

The won gained 0.5 percent to 13.46 versus the Japanese currency as of 12:54 p.m. in Seoul, according to data compiled by Bloomberg. The currency reached the resistance level of 13.42, where sell orders are clustered, on Oct. 4, Nov. 11 and Jan. 7. The currency’s 200-day moving average is 13.44 against the yen.

“There is a good chance for the won to break the current resistance level and the 200-day moving average as some other charts indicate a stronger won trend,” Shioiri said. “Such a break would clearly confirm a further gain in the won to the next resistance level.”

The Korean currency’s parabolic indicator also points to further appreciation after it rose through a stop-and-reversal-point last week, Shioiri said. That’s a buy signal for the won, he said. A parabolic system is similar to a moving average and is shown as a series of dots above and below the current price.

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: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.