Aug. 23 (Bloomberg) -- The yen’s breach of a key trading level opens the way for it to weaken to an almost one-month low versus the dollar, according to JPMorgan Chase & Co., citing technical analysis.
After weakening through support at 98.65 yesterday, the Japanese currency will test 99.10 before falling to 99.97, according to Niall O’Connor, a New York-based technical analyst at JPMorgan. That would be the lowest since July 25.
“The price action over the last few days has been constructive and suggests that we can see a test of 99.10, if not the 100 area,” O’Connor said in a telephone interview. “There’s potential to extend in dollar-yen.”
Japan’s currency declined 1.1 percent to 98.72 per dollar yesterday in New York after earlier depreciating as much as 1.2 percent to 98.81, its weakest level since Aug. 5.
The yen’s current downtrend was confirmed after it failed to strengthen through the area from 96.40 to 97 on Aug. 20, according to O’Connor. It touched a seven-week high of 95.81 on Aug. 8.
The Japanese currency has weakened 9 percent this year, the worst performer after Australia’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
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.
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