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Aussie-Yen to Drop on Retracement: Technical Analysis

The Australian dollar may be set for further declines against the yen as it tests a support area defined by a so-called Fibonacci retracement level, UBS AG said.

The Aussie, as the currency is also known, has been testing 80.10 yen, the 38 percent Fibonacci retracement of its advance from a low of 74.48 on June 1 to a high of 83.58 on Aug. 21, Richard Adcock, head of fixed-income technical strategy in London, wrote in an e-mailed note to clients yesterday. The currency may head toward 79.54 yen to 79.03 yen, Adcock wrote. The 79.54 figure was the lowest level in July, while 79.03 is the Aussie’s 50 percent retracement level last seen on June 18, according to data compiled by Bloomberg.

The Australian dollar-yen cross “has been under selling pressure,” Adcock wrote. “With the recent weakness seeing daily and weekly trending tools turn negative, the picture is bearish.”

Australia’s currency was little changed at 80.19 yen at 11:27 a.m. in Sydney from 80.18 yesterday, when it touched 80.07, the lowest since July 25. The Aussie has declined 1.8 percent since June 29 versus its Japanese counterpart, heading for its back-to-back quarterly losses since 2008.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break below support, as levels where there may be orders to buy are known, indicates it may decline to the next level. Resistance is an area on a chart where sell orders may be clustered,

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

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