Dollar May Rise 11 Percent Against Yen, Standard Chartered Says

By Yasuhiko Seki

Feb. 18 (Bloomberg) -- The dollar may gain 11 percent against the yen in the next three months should it rise above so-called resistance at 94.63 yen, based on trading patterns, Standard Chartered Plc said. in Singapore.

The 94.63 yen level would match the greenback’s highest this year, reached Jan. 6, as well as creating potential for a so-called double bottom on a daily chart using 13-week moving averages, Callum Henderson, head of global currency strategy at Standard Chartered in Singapore, wrote in a note to clients. A double bottom forms when a currency makes two successive troughs of similar depth, indicating potential for it to rebound.

“Recent chart activity does suggest buyers are active above the 87 double lows from December 2008 and January,” Henderson wrote. “The 89.60 level just below this has marked dollar buying when reached and if this continues to be the case over the coming sessions then the double bottom pattern should continue to unfold, with extension targets pointing to 102.20.”

The dollar fell to 92.23 yen as of 12:54 p.m. in Tokyo from 92.41 yen late in New York yesterday. The currency touched a 13- year low of 87.13 on Jan. 21. The yen strengthened versus 13 of the 16 most-active currencies today on concern stock declines will spur investors to sell higher-yielding assets they bought with funds from Japan.

“The dollar is expected to trend higher over the next three months toward 101 and higher,” Henderson wrote. Investors may benefit if they exit trades betting on U.S. dollar declines and buy the greenback any time it falls toward the support level of 90.30 yen, he said.

Momentum Indicators

Momentum indicators such as the relative strength index, which compares the magnitude of gains and losses, as well as the stochastic oscillator signal it may be time to buy the dollar, while moving average convergence/divergence may also show a “buy” signal shortly, he said.

A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall. MACD charts can indicate whether a price shift is a change in trend or a short-term deviation by comparing moving averages based on nine-, 12- and 26-day periods.

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

To contact the reporter on this story: Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net