Yen Chart Patterns Give Three Reasons to Buy: Technical Analysis

The yen is poised to extend this year’s gains versus the dollar, with three different analysts giving three separate reasons to be bullish based on trading patterns.

Dollar-yen has exited a symmetrical triangle formation, and may drop to 111.40, according to Commerzbank AG. The pair has broken from a bullish channel, raising the risk of a slide to 114.54 or lower, Skandinaviska Enskilda Banken AB said.

Weekly candlestick charts show a falling three pattern -- when three short ascending bars are flanked by long descending ones -- with dollar-yen set to decline toward the December low of 115.57, according to Mitsubishi UFJ Trust and Banking Corp.

“A falling three pattern is a sign of further declines for dollar-yen,” Yusuke Fujishima, a senior manager for currency and financial product trading at the Japanese bank, said by phone today. “The downward bias has intensified.”

Fujishima sees the key to further declines in a close below 117.58 for the pair, the 61.8 percent Fibonacci retracement of the rise from Dec. 16 to Dec. 23. The dollar slid 0.7 percent to 117.11 yen at 2:29 p.m. in Tokyo.

SEB analysts Anders Soderberg and Dag Muller put the critical support at 116.68. A rally above 119.97 would be needed “to think less of the downside potential” for dollar-yen, they wrote yesterday.

Commerzbank technical analyst Karen Jones wrote dollar-yen traded through support at 117.90, the 23.6 percent retracement of the rally from the October low to the December high.

“The market is viewed as vulnerable,” she wrote in an e-mailed note to clients yesterday.

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