USD/JPY further pullbacks appear unlikely – UOB

FX Strategists at UOB Group noted the diminishing odds for further USD-weakness in the near term.

Key Quotes

24-hour view: “While we indicated yesterday “any USD weakness is unlikely to threaten last Friday’s 111.36 low”, the sharp rebound to a high of 112.55 during NY hours came as a surprise. The recovery appears to have scope to test the major 112.60/65 resistance but at this stage, a clear break of this level seems unlikely. Only a move below 111.95 would indicate that the current upward pressure has eased (minor support is at 112.15)”.

Next 1-3 weeks: “While we expect USD to weaken further to 111.20, we warned yesterday (29 Oct, spot at 111.90) “this level may not come into the picture so soon”. That said, the robust rebound in USD yesterday that hit a high of 112.55 during NY hours came as a surprise. The high is not far from our 112.65 ‘key resistance’ and a break of this level would indicate that the current downward pressure has eased (and that last Friday’s 111.36 low is the extent of the current weak phase in USD). In other words, the odds further USD weakness have diminished. Looking ahead, a break of 112.65 would not change the current overall neutral outlook but would suggest USD has moved back into a consolidation phase”.