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Yen to Climb to Five-Month High, BofA Says: Technical Analysis

July 22 (Bloomberg) -- The yen may rally to its strongest level in almost five months versus the dollar after breaking a key level of resistance, according to Bank of America Corp.

The Japanese currency will face a test in the 98.30-to-98.76 area after breaching initial resistance at 99.58 today, according to MacNeil Curry, chief rates and currencies technical strategist in New York at Bank of America Merrill Lynch. If the yen increases past that resistance level, it may target 90.91, Curry said. That would be its strongest level since February.

“As dollar-yen traded up towards 103, we started to see signs of topping out, with an advance in stocks starting to look a bit exhausted,” Curry said in a telephone interview. “The upside for dollar-yen is limited. We could see a run down to the 93, potentially the 91 area.”

The yen increased 1.1 percent to 99.55 per dollar in New York, after rising as much as 1.4 percent, the most since July 11.

Japan’s currency has declined 10.2 percent this year, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro each advanced 4.6 percent.

“We’re still bullish dollar,” Curry said. “But we’re in a medium-term range-bound trading environment before the larger yen-bear trend resumes.”

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.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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