Australian Dollar May Extend Drop to 100.25 Yen, Forecast Says

By Ron Harui

Aug. 1 (Bloomberg) -- The Australian dollar may extend losses to 100.25 yen as soon as today, based on charts used to predict price movements, said Pak Lai Ng, a technical analyst at Forecast Pte Ltd. in Singapore.

The local dollar, known as the Aussie, is likely to decline further against the yen as its daily momentum indicators such as the moving average convergence-divergence, or MACD, and the relative strength index are signaling the currency's 12.2 percent rally since March 21 has probably ended, Ng said.

``All of the indicators are showing bearish divergence,'' Ng said. ``We see the Aussie coming off.''

Australia's dollar dropped to 100.78 yen, the lowest since July 2, before trading at 100.82 yen at 2:55 p.m. in Sydney from 102.15 yen late in Asia yesterday and 103.11 yen in New York on July 25. The Aussie has fallen 2.2 percent in the past week, the worst performance among the 16 most-active currencies versus the yen. The target of 100.25 yen is the July 2 low, Ng said.

MACD charts indicate whether a price shift is a change in trend or a short-term deviation by comparing moving averages based on 9-, 12- and 26-day periods.

The Aussie's 14-day relative strength index against the yen, a yardstick of momentum in a two-week period, was 39.13 today, down from 46.40 yesterday, showing the currency's uptrend is losing momentum, Ng said.

Should the Australian dollar weaken beyond 100.25 yen, the currency may extend its decline to so-called support at the 200- day moving average of 98.20 yen, Ng said. Support is where buy orders may be clustered.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance is where sell orders may be clustered, while support is where there may be buy orders.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net