The negative view in USD/JPY is seen alleviated on a break above 105.20, noted FX Strategists at UOB Group.
Key Quotes
24-hour view: “We highlighted last Friday that ‘the decline is severely oversold but there is room for USD to dip below 107.50 first before a more sustained rebound can be expected’. We added, ‘last month’s low at 104.16 is not expected to come into the picture’. Our view was not wrong as USD dropped to 104.25 before rebounding to end the day at 104.55 (-0.17%). Downward pressure has eased and USD is likely to consolidate and trade sideways for today, expected to be between 104.30 and 104.75.”
Next 1-3 weeks: “We have held a negative view in USD since early last week (see annotations in the chart below) and in our latest update from last Thursday (17 Sep, spot at 105.00), we highlighted that ‘the outlook remains weak’ and we were of the view that ‘the July’s low of 104.16 may be out of reach this time round’. However, downward momentum has been stronger than expected as USD dropped to a low of 104.25 last Friday. From here, USD could dip below 104.16 but oversold conditions suggest that a sustained decline below this level is unlikely (next support is at 103.80). All in, the weakness in USD appears to be overstretched but only a break of 105.20 (‘strong resistance’ level was previously at 105.50) would indicate that the negative phase has run its course.”
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