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FX Strategists at UOB Group noted USD/JPY faces a key support at 106.70 in the next weeks.

Key Quotes

24-hour view: “We expected USD to weaken yesterday but were of the view that ‘a break of 106.70 would come as a surprise’. The subsequent weakness exceeded our expectation as USD dropped to a low of 106.56. The weakness in USD is severely oversold now and further sustained weakness in USD is not expected. USD is more likely to consolidate and trade sideways at these lower levels. Expected range for today, 106.50/107.20.”

Next 1-3 weeks: “USD is currently holding just above the bottom of the 107.00/109.00 range that we indicated on Tuesday (09 Jun). The pullback in USD over the past few days has been more ‘aggressive’ than anticipated but we are not convinced that USD is ready to move into a negative phase just yet. Only a daily closing below 106.70 would indicate that USD is ready to move lower in a sustained manner towards the support at 106.00. At this stage, the prospect for a sustained decline in USD is not high but it would continue to increase unless USD can move above 108.00 within these few days. To put it another way, the outlook for USD is deemed as mildly negative for now.”

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