Dollar May Reach 94 Yen, Most Since May ’10: Technical Analysis

The dollar may advance to 94 yen, the strongest since May 2010, after a short-term setback this week, UBS AG said, citing trading patterns.

UBS plans to buy dollars at 86.70 yen, which is above the 38 percent retracement of the greenback’s recent rally, Richard Adcock, a foreign-exchange and fixed-income technical strategist in London, wrote in a note dated yesterday.

Stop-loss orders should be set at 85.40 yen, which is below the 62 percent retracement, according to Adcock, citing Fibonacci levels. A stop-loss is an automatic instruction to buy or sell a currency at a certain level to limit losses.

“There is no major resistance until 94.134, the 38 percent retracement of the June 2007 to October 2011 sell-off,” Adcock wrote. Resistance is where sell orders may be clustered. “We look to re-enter longs into setback to 86.70.”

The U.S. currency fell 0.3 percent to 87.55 yen at 1:35 p.m. in Tokyo, down 0.7 percent this week. It touched 88.41 on Jan. 4, the strongest since July 2010.

Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentage levels include 23.6, 38.2, 50, 61.8 and 76.4.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

Before it's here, it's on the Bloomberg Terminal.