The dollar may be poised for further declines against the yen after dropping below 79.14 last week, UBS AG said, citing trading patterns.
The 79.14 level is the 61.8 percent Fibonacci retracement of the U.S. currency’s advance from a low of 76.03 yen on Feb. 1 to a high of 84.18 yen on March 15, according to data compiled by Bloomberg.
“The directional risk is still skewed to the downside with little support” until the greenback’s February low, Richard Adcock, London-based head of fixed-income technical strategy in London, wrote in a report yesterday. Support refers to an area on a chart where orders to buy an asset may be clustered.
The dollar was little changed at 79.38 yen as of 8:48 a.m. in Tokyo from 79.31 yesterday. It breached the 79.14 level on May 18, when it dropped to as low as 79 yen. The U.S. currency has declined 0.6 percent this month versus its Japanese counterpart.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance indicates it may move to the next level.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.