USD/JPY looks bearish and could test 106.35 – UOB

FX Strategists at UOB Group keep the negative view on USD/JPY and a probable down move to the 106.30 area.

Key Quotes

24-hour view: “Our view for USD to “weaken further to 106.75″ was not wrong but the quick drop that touched 106.47 and the subsequent strong bounce from the low was not exactly expected. The sharp decline appears to be severely over-extended and further sustained weakness is not expected for today. USD is more likely to consolidate its loss and trade sideways, expected to be between 106.50 and 107.20″.

Next 1-3 weeks: “The shift in our “sideway-trading” view to “trade with a downside bias to 106.35″ yesterday (03 Oct, spot at 107.15) was timely as USD plummeted to an overnight low of 106.47. While oversold short-term conditions could lead to a couple of days of consolidation first, the near-term focus is still at 106.35. A break of this level would shift the focus to 106.00. All in, USD is expected to stay under pressure until it can move above 107.50 (‘strong resistance’ level was at 107.90 yesterday)”.