UOB Group currency strategists note that the USD / JPY could fall back to the 109.50 zone in the short term.
Key Comments:
24 hour view: “Our expectation of ‘more sideways moves’ in USD / JPY was incorrect, as it fell to a low of 109.95 the day before. The rapid decline seems exaggerated and USD / JPY is unlikely to weaken much further. What’s more the pair is likely to consolidate at these lower levels, which are expected to be between 109.90 and 110.55 ”.
Next 1-3 weeks: “We highlighted yesterday that ‘while the move is clearly overbought, it is too early to expect a significant pullback.’ We added, ‘a breakout of 110.20 would indicate that the current bullish pressure has eased.’ However, the way the USD / JPY fell below 110.20 was a surprise (low of 109.95). Price action suggests that last week’s high of 110.96 is short term. The current corrective pullback has room to drop to 109.55. Overall, USD / JPY is expected to trade on a downside bias as long as the ‘strong resistance’ at 110.75 is not removed. “
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