Failing Yen Support Puts 5-Year Low in Sight: Technical Analysis

The yen’s weakening past a key trading level opens the way for it to drop to the lowest level in five years versus the dollar, according to JPMorgan Chase & Co., citing technical analysis.

After depreciating through support in the 101.50-to-101.55 per greenback area, the Japanese currency will test its 2013 low of 103.74, according to Niall O’Connor, a New York-based technical analyst at JPMorgan. A decline to that level, reached on May 22, would match the weakest since October 2008.

“The break above the September high at 100.62 was probably the critical pivot for dollar-yen,” O’Connor said in a telephone interview. “For further confirmation, it moved past 101.55, which was around the July high.”

Japan’s currency declined 0.6 percent to 103.03 per dollar at 11:12 a.m. in New York after earlier deteriorating to 103.10, its weakest level since May 23.

The yen has decreased in seven of the last eight days and fell 4 percent in November, making it the second-worst performer out of 16 major currencies tracked by Bloomberg. The currency continued to weaken today as Bank of Japan Governor Haruhiko Kuroda said the central bank will keep monetary policy accommodative until inflation is stable at 2 percent.

The Japanese currency has dropped 14 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has gained 4 percent.

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.

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