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UOB Group’s FX Strategists believe USD/JPY could still grind lower in the next weeks.

Key Quotes

24-hour view: “Our expectation for USD to ‘trade sideways’ was wrong as it plummeted to 108.00. While the sharp and rapid drop appears to be overdone, USD could test 107.90 first before stabilization can be expected. For today, the next support at 107.70 is unlikely to come into the picture. Resistance is at 108.40 followed by 108.60.”

Next 1-3 weeks: “Two weeks ago (06 Apr), when USD was trading at 110.30, we highlighted that ‘a short-term top is in place’. As USD declined, in our latest narrative from last Wednesday (14 Apr, spot at 108.85), we noted that ‘downward momentum is beginning to wane but there is still chance for USD to move to 108.40’. We added, ‘further weakness to 108.00 is not ruled out but the odds for such a move are low’. After trading in a quiet manner and within relatively narrow ranges for a few days, USD cracked 108.40 and plunged to 108.00 yesterday (19 Apr). While the improved downward momentum suggests further USD weakness is likely, there is another major support at 107.65. In other words, 107.65 may not come into the picture so soon. On the upside, a break of 108.85 (‘strong resistance’ level previously at 109.20) would indicate that the pullback has run its course.”