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Dollar Seen Falling to 77.30 Yen on Ichimoku: Technical Analysis

July 25 (Bloomberg) -- The dollar is likely to extend declines to a five-month low against the yen, according to IG Markets Securities Ltd., citing trading patterns.

The daily Ichimoku chart shows that the conversion line has fallen below the baseline and the dollar-yen spot rate is underneath the so-called cloud, a bearish signal for the U.S. currency, according to Junichi Ishikawa, a Tokyo-based analyst at IG Markets. The lagging line is also beneath the spot rate, another sign the greenback may weaken, Ishikawa said.

The dollar may decline to 77.30 yen, near the lower end of the cloud on the weekly Ichimoku chart, Ishikawa said. That would be the lowest since Feb. 9, according to Bloomberg data.

“I wouldn’t be surprised to see dollar-yen falling toward the lower end of the cloud,” he said. “The downward pressure on dollar-yen is strong.”

The dollar traded at 78.11 yen as of 9:22 a.m. in Tokyo from 78.18 in New York yesterday, when it declined 0.3 percent. The greenback on July 23 reached 77.94 yen, the weakest since June 1. The U.S. currency has fallen 4 percent against the yen in the past three months.

Ichimoku analysis is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. The cloud refers to the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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