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In view of FX Strategists at UOB Group, USD/JPY could accelerate its correction lower on a close below the 106.70 level.

Key Quotes

24-hour view: “We highlighted yesterday there is “room for USD to test the strong 107.50 resistance” and added, “the prospect for a clear break of this level is not high”. USD subsequently touched 107.44 before staging a surprising rapid retreat (low of 106.79). While downward momentum has not improved by much, there is scope for USD to dip below the 106.79 low. That said, the next support at 106.45 is likely out of reach. Resistance is at 107.25 followed by the still very solid level of 107.50″.

Next 1-3 weeks: “The sudden surge in USD yesterday (NY close of 107.28, +0.32%) came as a surprise. While our 107.50 ‘key resistance’ is still intact (overnight high of 107.45), downward pressure has been dented and the odds for further USD weakness to 106.35 have diminished (we have expected USD to trade with a downside bias towards 106.35 since last Thursday, 03 Oct, spot at 107.15). In order to rejuvenate the flagging downward momentum, USD has to move and stay below 106.70 within these 1 to 2 days or a break of 107.50 would suggest that USD has moved into a sideway-trading phase”.