In opinion of FX Strategists at UOB Group, USD/JPY could test the 109.20 region ahead of a potential moderate rebound.
24-hour view: “We indicated last Friday that USD “could dip below the strong 109.40 support but last week’s low near 109.00 is unlikely to come under threat”. USD subsequently dipped to 109.26 before recovering. Downward pressure is beginning to wane and for today, 109.00 is still not expected to come into the picture. From here, USD could retest the 109.25 level before staging a more robust recovery. On the upside, a move above 109.65 would indicate that the current soft phase has stabilized”.
Next 1-3 weeks: “USD subsequently came close to the top of our expected 109.40/110.80 sideway-trading range (high of 110.67) before diving yesterday to an overnight low of 109.45, just above the bottom of our expected range. For now, there is no change to our view but we are not ruling out a dip below 109.40. That said, only a break of 109.00 would indicate that the current ‘sideway-trading’ phase has morphed into a ‘negative’ one”.