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UOB Group’s FX Strategists noted USD/JPY could recede to the 109.50 zone in the short-term.

Key Quotes

24-hour view: “Our expectation for ‘further sideway-trading’ in USD was incorrect as it lurched lower to an overnight low of 109.95. The rapid decline appears to be overdone and USD is unlikely to weaken much further. USD is more likely to consolidate at these lower levels, expected to be between 109.90 and 110.55.”

Next 1-3 weeks: “We highlighted yesterday that ‘while the rally is clearly overbought, it is too early to expect a significant pullback’. We added, ‘a break of 110.20 would indicate that the current upward pressure has eased’. However, the manner by which USD plunged below 110.20 came as a surprise (low of 109.95). The price actions suggest that last week’s high of 110.96 is a short-term. The current corrective pullback has scope to move lower to 109.55. Overall, USD is expected to trade with a downward bias as long as the ‘strong resistance’ at 110.75 is not taken out.”