A drop and subsequent visit to the 108.70 zone remains on the table for USD / JPY in the short term, note the currency strategists at UOB Group.
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24 hour view: “Yesterday, we held the view that ‘there is room for USD / JPY weakness to test 109.00’. Subsequently, USD / JPY fell to 109.11 before rebounding strongly. The downside momentum has eased and the current move it is seen as part of a consolidation phase. For today, USD / JPY is likely to trade between 109.25 and 109.70. “
Next 1-3 weeks: “There is not much to add to our update yesterday (Aug 17, USD / JPY at 109.25). As highlighted, the risk for USD / JPY is still on the downside and a breakout of 109.00 would shift focus to 108.70. That said, short-term oversold could lead to a couple of days of consolidation first. Downside risk is considered intact as long as USD / JPY does not move above 109.90 (no change in ‘strong resistance’ level).
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