USD/JPY looks weaker and could slip back to 108.00 – UOB

FX Strategists at UOB Group now expect USD/JPY to grind lower to the 108.00 region in the next weeks.

Key Quotes

24-hour view: “We expected USD to weaken yesterday but held the view “any weakness is expected to encounter strong support at 108.45″. The subsequent decline exceeded our expectation as USD dropped to 108.23 before recovering. The rapid drop appears to be running ahead of itself and further sustained weakness is not likely for today. That said, a retest of the 108.25 level would not be surprising but the next support at 108.00 is unlikely to come into the picture. Resistance is at 108.75 but only a move above 109.00 would suggest a short-term bottom is in place”.

Next 1-3 weeks: “We cautioned on Wednesday (13 Nov, spot at 109.00) that “risk of a short-term top has increased” and added yesterday (14 Nov, spot at 108.80) that “a short-term top is place and USD is likely to trade sideways for a period”. USD subsequently dropped below the bottom of our expected 108.45/109.30 range (low of 108.23) before recovering. The rapid decline has resulted in an improvement in downward momentum and from here, USD is expected to remain under pressure. Only an unlikely move back above 109.15 (‘strong resistance’ level) would suggest that downward pressure eased. Until then, the bias is for USD to trade lower towards 108.00 followed closely by a strong support at 107.85″.