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In opinion of FX Strategists at UOB Group, USD/JPY needs to close below 106.70 to allow for a deeper retracement in the short-term horizon.

Key Quotes

24-hour view: “We highlighted last Friday that ‘the weakness in USD is severely oversold now and further sustained weakness in USD is not expected’. However, we did not anticipate the subsequent sharp rebound as USD closed +0.46% higher at 107.34. The rebound has scope to extend higher and test the 107.70 resistance. For today, a sustained rise above this level is not expected (next resistance is at 108.00). Support is at 107.05 followed by 106.80.”

Next 1-3 weeks: “Last Thursday (11 Jun, spot at 107.05), we held the view that the outlook for USD ‘is mildly negative’. We indicated that USD has to ‘close below 106.70 before a sustained decline can be expected’. While USD subsequently dropped to 106.56, it did not close below 106.70. Despite the strong rebound last Friday, the risk for further USD weakness is still intact. Only a move above 108.00 (no change in ‘strong resistance’ level) would indicate the current mild downward pressure has eased. In other words, we continue to hold the same view from last Thursday.”

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