Bloomberg News

Dollar May Advance to 81 Yen on Ichimoku: Technical Analysis

November 30, 2011

Nov. 30 (Bloomberg) -- The dollar may reverse its declining trend against the Japanese currency since April and rise to a four-month high of about 81 yen, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing a so-called ichimoku chart.

The U.S. currency reached 85.53 yen on April 6, the strongest level this year, following Group-of-Seven intervention in the prior month to stem the yen’s appreciation. It then dropped to a post-World War II low of 75.35 on Oct. 31, which prompted Japan to sell its own currency to weaken it. The greenback rose to as high as 79.53 on the day of that intervention. After sliding back to 76.58 yen on Nov.18, the dollar climbed to a four-week high of 78.29 yesterday.

The daily ichimoku chart shows the dollar’s conversion line is crossing above its baseline, as the currency stays above the so-called cloud, and the greenback’s lagging span line has broken above the currency’s current level, said Teppei Ino, an analyst in Tokyo at the unit of Japan’s largest financial group.

“The dollar’s three buy signals are lighting up,” Ino said. “If the currency can stay around 78 yen, it will resume rising sooner or later.”

The dollar’s five-day moving average is also rising above its 21-day average, and its 65-day average is climbing above the 90-day line, Ino said.

The dollar will target a July 8 high of 81.48 yen, Ino said. It may reach that level by year-end or early January, he said.

Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows. The baseline plots the sum of the highest high and lowest low in the preceding 26 trading days. The conversion line is the same calculation over the past nine trading days. The cloud refers to the area between the first and second leading-span lines on the chart and is used to show an area where buy orders may be clustered.

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

--With translation by Ritsuko Kameyama in Tokyo. Editors: Jonathan Annells, Garfield Reynolds

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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