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FX Strategists at UOB Group see the possibility that USD/JPY could slip back to the 104.80 area in the next weeks.

Key Quotes

24-hour view: “USD traded between 104.94 and 105.68 yesterday. The price action was not unexpected as we highlighted that ‘after two straight days of back-to-back sharp decline, the weakness in USD appears to be overstretched’ and that USD ‘is more likely to consolidate and trade between 105.00 and 105.80’. Conditions remain oversold but USD appears to have enough momentum to grind lower towards 104.80. The next support at 104.40 is unlikely to come into the picture. Resistance is at 105.30 followed by 105.50.”

Next 1-3 weeks: “USD dropped by -0.71% yesterday (closed at 105.37) and downward momentum has improved further. We continue to hold a negative view and as highlighted yesterday (27 Jul, spot at 105.90), ‘the next level to focus on is at 105.00’. In view of the strong downward momentum, a break of 105.00 would not be surprising. That said, shorter-term conditions are oversold and the next support at 104.40 is unlikely to come into the picture so soon. All in, USD has to move above 106.30 (‘strong resistance’ level was at 106.80 yesterday) in order to indicate the current weakness has stabilized.”