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As noted by FX Strategists at UOB Group, the leg lower in USD/JPY could extend to the 108.40 area or even below in the next weeks.

Key Quotes

24-hour view: “Our expectations for USD to trade sideways yesterday was wrong as it plunged to 109.01 before extending its decline after opening in Asia. Downward momentum is strong and the risk is for USD to weaken further. However, oversold conditions could ‘limit’ any weakness to 108.40. Resistance is at 109.10 followed by 109.30.”

Next 1-3 weeks: “We have held a negative view in USD for more than a week now. In our latest narrative from Monday (12 Apr, spot at 109.65), we highlighted that ‘downside risk in USD is still intact but chance for a sustained decline below 109.00 is not high’. In other words, we did not quite anticipate the sudden sharp decline yesterday and the ease by which USD cracked 109.00 earlier. The vastly improved momentum indicates that the pullback that started earlier last week could extend to 108.40, with lower odds for extension to 108.00. Overall, USD is deemed to be under pressure as long as 109.60 is not breached (‘strong resistance’ level was at 110.35 yesterday).”