USD/JPY potential visit to 111.20 still on the cards – UOB

FX Strategists at UOB Group keep the neutral stance on spot, adding that a test of 111.20 remains in the pipeline for the time being.

Key Quotes

24-hour view: “We expected USD to trade sideways last Friday and the sharp and rapid drop to 111.36 and the subsequent swift and strong bounce from the low came as a surprise. While the underlying tone has softened, any weakness from here is unlikely to threaten the 111.36 low (111.55 is already a strong support level). Resistance is at 112.15 followed by 112.40″.

Next 1-3 weeks: “We detected the softness in the underlying tone in USD last Thursday (25 Oct, spot at 112.10) and highlighted, “a break of 111.80 would suggest further USD weakness to 111.20″. USD cracked 111.80 during NY hours last Friday and plummeted to a low of 111.36. The decline was however short-lived as it staged a strong rebound from the low but still closed markedly weaker for the day (NY close of 111.89, -0.45%). From here, the focus is at 111.20 even though this level may not come into the picture so soon. Only a break of 112.65 (‘key resistance’ previously at 112.80) would indicate that the current downward pressure has eased.