Dollar's Advance May Stall at 108.76 Yen on Charts, Daiwa Says

By Kosuke Goto

Aug. 6 (Bloomberg) -- The dollar's advance against Japan's currency may stall at 108.76 yen, said Eiji Kinouchi, chief technical analyst at Daiwa Institute of Research, citing charts traders use to predict price movements.

The U.S. currency's 25-day moving average versus the yen has risen since late last month, a bullish signal for the next few weeks, Tokyo-based Kinouchi said. The dollar may keep climbing until it reaches 108.76, its 260-day moving average and a level where sell orders are likely to be placed, he said.

``Technically, there is a sign of dollar buying,'' said Kinouchi at the unit of Japan's second-largest brokerage. ``The dollar may be well supported for the next half a month, but the currency's advance should be limited.''

The dollar traded at 108.38 yen as of 11:27 a.m. in Tokyo from 108.35 yen late yesterday in New York. It has gained 1.5 percent versus the yen in the past month.

The U.S. currency's 260-day moving average has been declining since August, which signals it may keep falling in the longer term, according to Bloomberg data.

Traders often look for signs of a currency's short-term outlook by viewing the five-day moving average and aim to forecast longer trends by looking at the 25- and 260-day moving averages. Analysts use these averages to identify levels of support, where buying is expected, or resistance, where selling is predicted.

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

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.