Yen May Rally to 2-Week High, JPMorgan Says: Technical Analysis

The yen may strengthen to a two-week high versus the dollar based on resistance levels before Japan’s currency resumes a bearish path, according to JPMorgan Chase & Co., citing trading patterns.

“The dollar/yen can correct a bit more over the short term and retrace into the 87.80/86.80 yen zone,” Niall O’Connor, a technical analyst at JPMorgan Securities, wrote in an e-mail. During the next two months, O’Connor predicted the yen will weaken to around 92.25, the lowest level since June 2010.

The yen rose to 88.54 per dollar at 11 a.m. New York time. It has weakened against the dollar for 13 of the past 14 weeks.

The currency may reach 86.80 yen, a level last reached on Jan. 3, after the Bank of Japan under outgoing Governor Masaaki Shirakawa said it will buy 13 trillion yen ($146.6 billion) in assets from January 2014 and target a 2 percent inflation rate, O’Connor said.

“The medium-term JPY underperformance trade does not seem complete, and corrective retracements are still viewed as opportunities to sell JPY,” O’Connor wrote in a note to clients.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a bond, commodity, currency or index. Resistance is an area on a price graph where technical analysts anticipate sell orders to be clustered.

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