Dollar May Rise to 115.70 Yen on Technical Charts, MUFG Says

By Kosuke Goto

Dec. 25 (Bloomberg) -- The dollar may strengthen to a two- month high of 115.70 yen in a few weeks, said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., citing technical charts.

Resistance at around 115.70 yen represents a 50 percent retracement of the dollar's decline from its June 22 high of 124.13 to its Nov. 26 low of 107.23, according to a series of numbers known as the Fibonacci sequence. The U.S. currency is poised to gain after it rose above the upper side of clouds on the so-called Ichimoku chart, which stayed at 113.53 today. Resistance is a level where sell orders may be clustered.

``The dollar's uptrend is very firm technically,'' said Hashimoto at Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's largest publicly listed lender. ``It will likely challenge higher levels in the coming few weeks.''

The dollar traded at 114.28 yen at 7:45 a.m. in London from 114.29 in New York yesterday, when it advanced to 114.49, the strongest since Nov. 7.

Other Fibonacci levels include 23.6 percent, 38.2 percent and 76.4 percent. A break of one indicates a currency may move to the next. A failure suggests a trend may stall.

An Ichimoku chart analyzes the midpoints of historic highs and lows. A cloud, used to identify levels of support where traders expect buying, or resistance where they expect selling, is the area between the first and second leading span lines.

Moving Averages

The dollar is also likely to rise after it broke through its 65-day and 90-day moving averages. The dollar has risen above the 65-day moving average, which stayed at 113.28 yen today, since Dec. 14. It also climbed above the 90-day moving average today, which stayed at 113.83 yen, signaling the dollar is likely to remain strong in the medium term.

Traders typically look for evidence of a currency's short- term trend by viewing the five-day moving average, and aim to forecast two- to three-week trends with the 21-day moving average and a three-month trend with 65-day and 90-day moving averages. They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is forecast to take place.

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

Source: bloomberg.com