Dollar’s Fall Versus Yen May Stall, Reverse: Technical Analysis

By Ron Harui

July 14 (Bloomberg) -- The dollar’s decline against the yen may stall before it reaches so-called support at 91.30, Standard Chartered Plc said, citing trading patterns.

The 91.30 yen support level is the dollar’s high set on Jan. 19, according to a chart compiled by Standard Chartered. The Jan. 19 high is a previous level of resistance, which has become support since it has been breached. Support is where buy orders may be clustered. Resistance is where there may be sell orders.

“The dollar-yen breakdown is expected to be short-lived ahead of 91.30 support,” Callum Henderson, global head of currency strategy at Standard Chartered in Singapore, wrote in a research note yesterday. “Clients should close short dollar-yen positions and look to buy into this dip ahead of 91.30.” A short position is a bet an asset will fall.

The dollar traded at 93.12 yen as of 7:55 a.m. in Tokyo after weakening to 91.74 yen yesterday, the lowest level since Feb. 17. The U.S. currency slumped 3.6 percent against the yen last week, the biggest drop since the five days ended Oct. 24.

“Look for a push back above 95 to follow,” Henderson wrote. Should the greenback rise beyond “congestive resistance” at 95 yen, the dollar may extend its rally to 99 and then to 101.45 or higher, he said.

The 95 yen level was last seen on July 7, 99 yen is near the June 5 high of 98.89 yen, and 101.45 yen represents the April 6 high, according to data compiled by Bloomberg.

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

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