Dollar on Verge of Correction Against Yen: Technical Analysis
The dollar is on the verge of a downward correction versus the yen after it failed to surpass 95, Mizuho Corporate Bank Ltd. said, citing trading patterns.
The greenback touched 94.77 yen on Feb. 25, the highest since May 2010, before falling below the base line of its daily ichimoku chart for the first time in three months. The U.S. currency traded at 91.88 as of 12:38 p.m. in Tokyo, compared with the base line at 91.41 and yesterday’s close at 91.98.
“Should the dollar close below the base line, it’s likely to drop further,” said Hiroyuki Tanaka, the chief technical analyst at Tokyo-based Mizuho, a unit of Japan’s third-biggest financial group by market value. “The dollar may plunge into the cloud and slide toward a 86-88 range by the end of March” once it enters a declining trend, he said. The greenback has been above 86 this year.
The cloud on an ichimoku chart 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. It stretches between 84.73 and 88.04 today.
Ichimoku analysis is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
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