The yen may weaken through the 100- per-dollar level and another technical area to reach a 4 1/2- year low, according to UBS AG.
If the Japanese currency breaches support at 101.45 per dollar, it could decline to 105.75, the 62 percent Fibonacci retracement of the yen’s appreciation from June 2007 to October 2011, Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote today in a note to clients. It last touched that level in October 2008.
UBS’s dollar-yen focus “is on the psychological resistance at 100,” Adcock wrote in a client note. “We expect this and resistance offered by the 101.45 April 2009 to give way, extending the gains. We continue to recommend increasing longs on a close above 100.” A long position is a bet the dollar will increase in value.
Japan’s currency increased 0.2 percent to 99.31 per dollar at 1:10 p.m. after earlier depreciating as much as 0.4 percent. The yen touched 99.95 percent on April 11, its weakest level since April 2009.
The yen has declined 11 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 3.2 percent, while the New Zealand dollar led all gainers with a 4.9 percent increase.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered, and support is an area where there may be buy orders.
Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, known as Fibonacci, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.
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