In light of the recent price action, Prospects for a further decline in USD / JPY appear to be diminishing, have commented the currency strategists at UOB Group.
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24 hour view: “We highlighted yesterday (September 17, USD / JPY at 109.75) that ‘conditions remain oversold and together with the rapid rebound indicates that USD / JPY is unlikely to weaken further’ and we expected USD / JPY to weaken further. “consolidate and trade between 109.15 and 109.65.” While our view that USD / JPY is unlikely to weaken further is correct, we did not expect the rapid rise during the New York session to 109.82. The advance has room for to extend, but a clear breakout of the main resistance at 110.05 is unlikely (next resistance is at 110.25). Support is at 109.60, followed by 109.45. “
Next 1-3 weeks: “On Wednesday (Sep 15, USD / JPY at 109.60), we highlighted that USD / JPY ‘has to close below 109.30 before a sustained decline can be expected.’ After USD / JPY fell to 109.09 (but will not close below 109.30), we highlighted yesterday (September 16, USD / JPY at 109.40) that ‘we prefer to wait for a daily close below 109.30 before taking a more negative stance on USD / JPY’ The pair subsequently rebounded to a high of 109.82 during the New York session. While our “strong resistance” level at 109.90 is not broken, the downside momentum has faded. In other words, the risk to the downside. low has dissipated. USD / JPY is likely to have returned to a consolidation phase and could move between 109.30 and 110.25 for now. “
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