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Dollar to Fall to One-Month Low Versus Yen: Technical Analysis

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March 22 (Bloomberg) -- The U.S. dollar may fall to an almost one-month low against the yen in coming weeks, according to Gaitame.com Research Institute Ltd., citing trading patterns.

The greenback will probably decline to the Feb. 25 low of 90.88 yen in half a month, should it breach its 20-day moving average of 94.50, said Takuya Kawabata, an analyst at a unit of Japan’s largest currency margin company. The 94.50 level is also close to the dollar’s Feb. 12 intra-day high of 94.41 that has been acting as a key support level, he said.

“The drop could get quite deep,” Kawabata said. “The formation on the candlestick chart looks bearish for the dollar. Its intraday highs have been grinding lower in the past week and have failed to reach 97 yen, showing the recent gains are stalling.”

The dollar was little changed at 94.93 yen at 12:22 p.m. in Tokyo from yesterday, when it dropped 1.2 percent. The U.S. currency reached 96.71 on March 12, the highest since August 2009.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen against the dollar compared with those on a gain -- so-called net shorts -- was 93,763 on March 12, the most since the week ended Dec. 14, according to figures from the Washington-based Commodity Futures Trading Commission.

“The yen short position is starting to look quite extended,” Kawabata said. “I’ll be watching how much unwinding there may be this week.”

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

To contact the reporter on this story: 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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