By Candice Zachariahs
Sept. 1 (Bloomberg) -- The U.S. dollar may slide 6 percent toward 87 yen if it falls below support clustered around the July low of 91.74 yen, JPMorgan Securities Inc. said, citing trading patterns.
The decline in the dollar yesterday “took on a more impulsive bias with the break of the key 93.20-93.10 support area and raising the risk of a deeper decline and retest of the critical” July low, wrote Niall O’Connor, a technical currency analyst in New York at JPMorgan, in a note to clients today. “The short-term setup argues for some bounce from this area, but note there is still no sign of a basing pattern.”
The greenback is likely to weaken to the January-December “double bottom” toward 87 yen, should it drop below 91.74, O’Connor said. A double bottom occurs when a currency makes two consecutive troughs of about the same depth, and indicates it may rebound.
The dollar declined for a second day, losing 0.1 percent to 93.06 yen as of 9:53 a.m. in Tokyo. That’s below the 61.8 percent Fibonacci retracement at 93.13 from this year’s low of 88.91 yen reached on Jan. 23. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.
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: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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