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Sellers in USD/JPY are expected to meet strong support in the 106.00 neighbourhood, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘further volatile price action is not ruled out but USD is likely to stay within yesterday’s broad range of 106.06/107.21’. Our view was not wrong as USD traded in a relatively quiet manner during Asian hours before suddenly surging to a high of 107.07. While overbought, the rapid rise in USD has scope to move above the strong resistance at 107.20 but 107.40 is likely out of reach. Support is at 106.80 followed by 106.50.”

Next 1-3 weeks: “We have held the same view for about 2 weeks wherein USD is under mild downward pressure and only a daily closing below 106.70 would indicate that it could weaken to 106.00. After trading in a muted manner for several days, USD woke up with a jolt as it dropped to 106.73 early yesterday, snapped back up to 107.21 before plunging overnight to a low of 106.06. The daily closing at 106.51 (-0.34%) is on the soft side and the risk from here is for USD to weaken. A break of the solid support at 106.00 is not ruled out but this level could remain intact for a few more days. Looking ahead, a break of this level would shift the focus to 105.50. On the upside, the ‘strong resistance’ level has moved lower to 107.20 from yesterday’s level of 107.40. On a shorter-term note, 106.95 is already quite a strong level.”