A close below 109.30 could open the door for a deeper pullback in the USD / JPY pair. on the short-term horizon, note the currency strategists at UOB Group.
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24 hour view: “Although we expected USD / JPY to weaken yesterday, we are of the opinion that ‘oversold conditions suggest that any weakness is unlikely to break the main support at 109.30.’ However, USD / JPY tumbled to 109.09 before rebounding. Conditions remain oversold and this coupled with the rapid rebound indicates that USD / JPY is unlikely to weaken further. For today, USD / JPY is more likely to consolidate and trade between 109.15 and 109.65. “
Next 1-3 weeks: “We highlighted yesterday (September 15, USD / JPY at 109.60) that ‘while downside risk has increased, USD / JPY has to close below 109.30 before a sustained breakout can be expected.’ And we add that “The next support is at 109.00.” We do not anticipate the rapid decline to 109.09 and the subsequent bounce (USD / JPY closed at 109.36 in NY). There is no change in our opinion for now and although the risk is to the downside, We prefer to wait for a daily close below 109.30 before taking a more negative stance on USD / JPY. On the upside, a breakout of 109.90 (the ‘strong resistance’ level was at 110.15 yesterday) would indicate that the risk to the casualty has dissipated. “
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