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FX Strategists at UOB Group now see USD/JPY facing some downside risks in the near-term.

Key Quotes

24-hour view: “We held the view yesterday that USD ‘has likely moved into a consolidation phase’ and expected it to ‘trade within a 105.50/106.20 range’. Our view for USD to consolidate was not wrong even though it traded within a narrower range than expected (between 105.58 and 106.15). The consolidation phase appears to be on-going but the slightly firmed underlying tone suggests USD is likely to trade at a higher range of 105.75/106.25.”

Next 1-3 weeks: “We highlighted yesterday that ‘the risk has shifted to the downside’ and USD ‘could test the solid support at 104.70’. We added, ‘the ‘strong resistance’ at 106.30 is likely strong enough to hold, at least for these few days’. The subsequent rebound in USD is more robust than anticipated (high of 106.09) and while we continue to see chance for USD to test 104.70, we are moving the ‘strong resistance’ level slightly higher to 106.55. Meanwhile, oversold short-term conditions could lead to a couple of days of consolidation first (before downside risk should increase again).”

 

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