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USD/JPY is now expected to trade on a 108.80-110.00 consolidation theme in the next weeks. Suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we highlighted yesterday that ‘deeply overbought conditions suggest that USD is unlikely to strengthen further’, we expected USD to ‘to consolidate and trade between 109.50 and 110.05’. However, USD dropped sharply to 109.34 before settling on a soft note at 109.54 (-0.25%). The sharp drop appears to be running ahead of itself but there is room for USD to dip below the strong support at 109.30. For today, the next support at 109.10 is unlikely to come into the picture. Resistance is at 109.65 followed by 109.85.”

Next 1-3 weeks: “In our latest narrative from last Friday (28 May, spot at 109.90), we indicated that ‘strong boost in momentum suggests further USD strength’. While USD rose to 110.19, the subsequent pullback came close to taking out our ‘strong support’ at 109.30 (overnight low of 109.34). Rapid loss in momentum suggests that USD strength has ended sooner than expected. USD is likely to consolidate and trade between 108.80 and 110.00 for now.”