The Greenback Goes ‘Sayonara’
Posted by Larry Doyle on July 8, 2009 5:09 PM |
With risk aversion running rampant once again through our domestic markets, we saw a significant flight from the U.S. dollar into the Japanese yen today. The U.S dollar was close to parity versus the Japanese yen a few months back but has since broken down by over 7%, a significant move within currency markets.
As Bloomberg reports, Dollar May Drop to 14-Year Low Against Yen:
The dollar may drop beyond a 14-year low of 87 yen if it closes below a “neckline” level of 94.08 yen, according to technical analysts at Citigroup Inc.
A support level at 94.08 yen represents the neckline of a so-called head-and-shoulders pattern, Citigroup analysts Tom Fitzpatrick in New York and Shyam Devani in London wrote today in a note to clients.
Sure enough the dollar did take out neckline at 94.08 and closed today’s trading at 92.65. For those who care, a ‘neckline‘ and ‘head and shoulders‘ pattern are standard technical terms within trading used to define price graphs. Our investing primer, to which I have linked, provides great definitions and pictorials.
Having taken out the neckline, what is the targeted level for the dollar versus the yen? Bloomberg offers further color:
that would “suggest a more aggressive downside target of sub 87,” the analysts wrote. The dollar touched 87.13 yen in intraday trading on Jan. 21. It was last below 87 yen in July 1995.