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FX Strategists at UOB Group see USD/JPY dropping further and visiting the 106.30 region in the near term.

Key Quotes

24-hour view: “While we expected USD to “extend its decline to 107.50″ yesterday, the manner by which USD crashed through 107.50 and dropped to 107.03 came as a surprise. Downward momentum has picked up strongly and from here, USD is expected to weaken further to 106.75 (minor support is at 107.00). On the upside, 107.60 is expected to be strong enough to cap any intraday recovery in USD (minor resistance is at 107.35)”.

Next 1-3 weeks: “We ‘downgraded’ the upside risk for USD yesterday (02 Oct, spot at 107.75) and held the view that USD has “moved back into a sideway-trading phase” (we previously expected USD to test 108.50). However, the rapid manner by which USD approaches the bottom of our expected sideway trading range of 107.00/108.50 came as a surprise (overnight low of 107.03). Downward momentum has picked up considerably and from here, USD is expected to trade with a downward bias towards the next support at 106.35. All in, the risk for USD for the next week or so is tilted to the downside unless it can move above 107.90 (‘strong resistance’ level)”.