Following the recent price action, USD / JPY could fall back to the 104.40 region in the coming week, UOB Group currency strategists have pointed out.
Key Comments:
24 hour view: “We highlighted yesterday that ‘there is room for USD / JPY to retest the 105.20 level before a more sustained recovery can be expected.’ We added, ‘the outlook for a breakout of strong support at 105.00 is not high.’ The sharp drop after 104.97 came as a surprise. Strong bearish momentum suggests further USD / JPY weakness, but the current month’s low at 104.40 is probably out of reach (104.70 is already quite a strong level). Resistance is at 105.20 followed by 105.45 “.
Next 1-3 weeks: “We have had a positive view on USD / JPY since the beginning of last week. After USD / JPY retraced after touching 106.21, we warned yesterday (Feb 22, USD / JP at 105.50) that ‘bullish momentum has diminished rapidly’ and ‘the prospect of further USD / JPY strength has diminished considerably’ . The positive phase came to an end when USD / JPY broke our ‘strong support’ level at 105.00 yesterday (low of 104.97). The current move is seen as a pullback that has room to test the monthly low at 104.40. At this time, the prospect of a sustained decline below this level is not high. On the upside, a break out of the ‘strong resistance’ at 105.65 would indicate that the current bearish pressure has eased. “
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