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FX Strategists at UOB Group expect losses in USD/JPY to gain traction on a breakdown of the 106.65 level.

Key Quotes

24-hour view: “We expected USD to weaken yesterday but were of the view that ‘strong support at 107.00 is likely out of reach for now’. However, USD dipped below 107.00 (low of 106.96) before ending the day on a soft note at 107.20. The rapid decline appears to be running ahead of itself but the weakness is not showing sign of stabilizing just yet. From here, barring a move above 107.60 (minor resistance at 107.40), USD could weaken further to 106.65 before a recovery can be expected. In other words, a sustained decline below 106.65 is unlikely for now.”

Next 103 weeks: “We highlighted on Monday (13 Apr, spot at 108.20) the bias for USD ‘is tilted to the downside’ and added, ‘any weakness is viewed as part of a 107.00/109.00 range’. While our view was not wrong, the pace by which USD moved to 107.00 (overnight low of 106.96) was more rapid than expected. USD is still under pressure but downward momentum has not improved by all that much and USD has to close below 106.65 before further weakness towards 106.05 can be expected. The prospect for such a scenario is not high but it would continue to increase unless USD moves above the ‘strong resistance’ level at 108.00.”