Dollar May Climb as High as 105 Yen: Technical Analysis

The dollar may strengthen to 105 yen over the next couple of years, a level unseen since October 2008, Mizuho Corporate Bank Ltd. said, citing trading patterns.

The U.S. currency’s rise in February above the so-called cloud between the first and second leading span lines on the weekly Ichimoku chart signals the greenback is poised to advance further against its Japanese counterpart, according to Hiroyuki Tanaka, chief technical analyst at Mizuho in Tokyo. The dollar will climb to 85 yen, near the baseline of the monthly Ichimoku chart, Tanaka said. It will then advance to between 100 and 105, he said. The upper end of the range is above the top of the cloud on the monthly chart.

“Dollar-yen is likely to follow a similar move to what we saw in 2001 and 2005,” Tanaka said. The pair climbed above the cloud on the monthly Ichimoku chart in July 2001 and November 2005. Tanaka predicts it will again breach the top of the cloud “in about two years.”

The greenback rallied to 84.18 yen on March 15, the strongest since April 2011. It traded at 80.76 yen as of 9:28 a.m. in Tokyo, 0.1 percent above yesterday’s close in New York.

Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.