According to FX Strategists at UOB Group, USD/JPY is expected to grind lower towards the 108.00 neighbourhood in the next weeks.
Key Quotes
24-hour view: “We expected ‘further USD weakness’ yesterday but were of the view ‘oversold conditions could limit weakness to 108.30’. However, USD rebounded strongly after touching a low of 108.41. Downward momentum has dissipated and indicators are unwinding from oversold conditions. For today, USD is likely to consolidate and trade sideways, expected to be within a 108.50/109.10.”
Next 1-3 weeks: “We detected the weakened underlying tone yesterday (03 Dec, spot at 109.00) and expected USD ‘to test the bottom sideway-trading range’ at 108.50 first. While the view was not wrong, the rapid pace of the subsequent decline came as a surprise as USD plummeted and moved a few pips below 108.50 during NY hours (low of 108.47). The price action has resulted in a rapid improvement in momentum and from here, USD is expected to trade with downward bias towards 108.05. On the upside, only a break of the 109.20 ‘strong resistance’ would indicate that our view is wrong.”
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