Following the recent price action, USD/JPY could slip back to the 104.40 region in the next week, noted FX Strategists at UOB Group.
24-hour view: “We highlighted yesterday that ‘there is room for USD to retest the 105.20 level before a more sustained recovery can be expected’. We added, ‘the prospect for a break of the ‘strong support’ at 105.00 is not high’. The subsequent sharp drop to a 104.97 came as a surprise. Strong downward momentum suggests further USD weakness but the month-to-date low at 104.40 is likely out of reach (104.70 is already quite a strong level). Resistance is at 105.20 followed by 105.45.”
Next 1-3 weeks: “We have held a positive view in USD since early last week. After USD retreated after touching 106.21, we cautioned yesterday (22 Feb, spot at 105.50) that ‘upward momentum has waned quickly’ and ‘prospect for further USD strength has diminished considerably’. The positive phase came to an end as USD took out our ‘strong support’ level at 105.00 yesterday (low of 104.97) The current movement is viewed as a pullback that has scope to test month-to-date low at 104.40. At this stage, the prospect for a sustained decline below this level is not high. On the upside, a break of the ‘strong resistance’ at 105.65 would indicate the current downward pressure has eased.”