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Yen May Decline to 31-Month Low, UBS Says: Technical Analysis

The yen may weaken to the lowest level in more than 31 months against the dollar if the U.S. currency ends the week above a key support level, according to UBS AG, citing technical indicators.

If the Japanese currency breaches support at 84.20 per dollar, it could decline to 94.13, the 38 percent Fibonacci retracement of the yen’s appreciation from June 2007 to October 2011, Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote today in a note to clients. It last touched that level in May 2010.

“A weekly close (of the dollar) above 84.20 would trigger a much more significant trend change from a longer-term perspective, at which point we’d be looking for a much more prolonged uptrend to materialize,” Adcock said in a telephone interview.

Japan’s tender fell 0.4 percent to 84.21 per dollar at 2:18 p.m. in New York after touching 84.48 yesterday, its weakest level since April 2011.

The yen has declined 13 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 3.4 percent, while the New Zealand dollar led all gainers with a 5.7 percent increase.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered, and support is an area where there may be buy orders.

Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, known as Fibonacci, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.

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