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FX Strategists at UOB Group noted the downside momentum in USD/JPY could allow for a test of the 108.40 region in the next weeks.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘severely oversold conditions suggest further sustained weakness is unlikely’ and expected USD to consolidate and ‘trade sideways between 108.70 and 109.25’. USD subsequently traded between 108.74 and 109.19. The price action is still viewed as part of a sideway-trading phase even though the improved underlying tone suggests a higher trading range of 108.90/109.35.”

Next 1-3 weeks: “While we indicated last Thursday (23 Jan, spot at 109.55) that the risk for USD ‘has shifted to the downside’, the manner by which it cracked 109.00 came as a surprise (USD gapped lower upon opening yesterday and dropped to 108.72). The price action suggests USD could weaken further to 108.40. At this stage, the prospect for further weakness to 108.00 is not high. Only a move above 109.50 would indicate the current weakness has stabilized.”