Dollar May Extend Slide to as Low as 90 Yen: Technical Analysis

By Hiroko Komiya

May 21 (Bloomberg) -- The dollar may weaken to 90 yen should it fall below a March low of 93.54 yen, said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., citing trading patterns.

Should the U.S. currency keep declining below its March 19 low, the next level of so-called support would be 92.60 yen, a 61.8 percent retracement of the rally from January to April, Tokyo-based Hashimoto said. The currency may then move toward a low of 90 yen, he said, based on a so-called “head-and- shoulders” formation that peaked at 101.44 yen on April 6.

“The dollar has fallen below its 90-day moving average, ending an upward trend which has been in place since January,” Hashimoto said. “The key now is whether the dollar’s decline will halt at the lower half of 94 yen where the lower end of downward channel line lies.”

The dollar fell as low as 94.29 yen today, the weakest level since March 20, before trading at 94.66 yen as of 10:15 a.m. in London from 94.88 yesterday in New York.

The dollar’s decline below its April 28 low of 95.63 has confirmed the formation of a head-and-shoulders pattern, Hashimoto said.

A head and shoulders is formed when a currency makes three consecutive peaks, with the middle being the highest. The neckline is drawn across the base of the three peaks. Support refers to an area where buy orders may be placed.

To contact the reporter on this story: Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net.