Feb. 8 (Bloomberg) -- The yen will weaken against the dollar as it bounces off a key resistance level, Citigroup Inc. said, citing Ichimoku cloud-chart analysis.
The yen has strengthened to the Ichimoku conversion line of 92.20 and will depreciate to recent lows against the greenback “within a couple of weeks,” Osamu Takashima, a foreign-exchange strategist at Citibank Japan Ltd., wrote in a note to clients today. The conversion line has acted as strong resistance since October, he said.
The directions of the conversion line and the base line “are upward, and it suggests the basic trend of the pair must be upside,” which indicates a weakening yen, Takashima wrote in an e-mail from Tokyo.
The yen appreciated 0.9 percent to 92.85 per dollar at 9:44 a.m. in New York, after touching 92.17, the strongest level in three days.
Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historic highs and lows. The conversion line plots the sum of the highest high and lowest low over the past nine trading days. The baseline is the same calculation over the past 26 days.
The cloud refers to the area between the first and second 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 and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area where sell orders are anticipated.
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