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If USD/JPY closes below the 107.00 handle it should enter into a ‘negative phase’, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “Although we were expecting rallies above 109 to be unsustainable, the resulting selloff to 107.25 low was a big surprise. The sharp move is likely to jolt USD to new lower trading ranges going forth although a strong follow-through similar in scale to yesterday is unlikely today. Expect an enlarged and lower range for today, 106.80/108.00″.

Next 1-3 weeks: “The sharp sell-off in USD overnight is likely to spur repositioning for a lower USD/JPY going forward. Momentum has clearly rebuilt aggressively on the downside. In face of that, Jul’s low of 107.20 is likely to yield easily. The 107.00 level would probably be a better ‘litmus test’ whether the down move has legs to and a NY close below that means that USD has entered a ‘negative phase’ Beyond 107.00, supports are at Jun’s low of 106.77 then 106.35. On the upside, resistance is expected at 107.70 and only a recovery above 108.20 would indicate that downside pressures on the USD has eased”.