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Yen Slide to 88 Seen in Ichimoku: Technical Analysis

Dec. 19 (Bloomberg) -- The yen has entered a fifth weakening cycle since the 1985 Plaza Accord and is poised to depreciate to about 88 per dollar, according to Bank of Tokyo-Mitsubishi UFJ Ltd., which cited trading patterns.

The conversion line rose above the base line on the monthly Ichimoku chart of the dollar-yen rate last month, a bullish signal for the greenback, according to Teppei Ino, an analyst at the unit of Japan’s biggest financial group by market value. In the near term, the yen is likely to depreciate toward the lower end of the cloud at 88.69 per dollar should it cross last year’s weakest point of 85.53, Ino said.

“Dollar-yen has reached a recent high, and it’s looking like the bullish trend for the pair will continue for some time,” Tokyo-based Ino said.

Since the Plaza Accord, when finance chiefs from the largest economies agreed to weaken the dollar, there have been large run-ups in the dollar-yen rate in 1989, 1996, 2001 and 2005, each lasting more than 18 months, according to Ino. Given the yen has appreciated “for a long time” since June 2007, the reversal is likely to take just as long, he said.

The Japanese currency weakened 0.1 percent to 84.33 per dollar as of 9:03 a.m. in Tokyo from yesterday. It touched 84.48 on Dec. 17, the lowest level since April 12, 2011. In October last year, the yen touched a postwar record of 75.35.

Ichimoku charts are used to predict a currency’s direction by 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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