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USD/JPY is seen extending its current correction phase in the next weeks, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to strengthen yesterday but we were of the view ‘105.50 is not expected to come into the picture’. Our view was not wrong even though the pace of advance was faster than we expected (USD touched an overnight high of 105.48). Upward momentum has improved, albeit not by all that much. From here, we see room for USD to edge higher but a sustained rise above the major 105.75 resistance is unlikely (next resistance is at 106.00). Support is at 105.10 followed by 104.90.”

Next 1-3 weeks: “We have held a negative view in USD since early last week. In our latest narrative from Monday (21 Sep, spot at 104.55), we held the view that USD ‘could dip below 104.16 but oversold conditions suggest that a sustained decline below this level is unlikely’. We added, ‘the weakness in USD appears to be overstretched but only a break of 105.20 (‘strong resistance’ level was previously at 105.50) would indicate that the negative phase has run its course’. USD subsequently dropped to a low of 103.99 before rebounding strongly over the past two days. While 105.20 is still intact, the rapid loss in momentum indicates that the negative phase has run its course. The current movement is viewed as the early stages of a correction phase. From here, USD could edge higher but any advance is viewed as part of 104.25/105.75 range (for now, a sustained rise above 105.75 is not expected).”