USD/JPY negative, room for a test of 109.35 – UOB

FX Strategists at UOB Group noted the pair’s stance remains neutral and could visit the 109.35 level in the next weeks.

Key Quotes

24-hour view: “Expectation for sideway trading last Friday was wrong as USD dropped to hit a low of 110.48 (before extending its decline this morning to a low of 110.33). Despite the decline, downward momentum is patchy at best and we do not expect further USD weakness from here. This pair is more likely to trade sideways at these lower levels, expected to be within a 110.30/111.10 range”.

Next 1-3 weeks: “While we highlighted last Friday (10 Aug, spot at 111.10) that the “risk of a break of 110.60 has increased”, the subsequent sharp and rapid drop that hit a low of 110.33 early this morning was not exactly expected. Despite the relatively large decline, we believe it is premature to expect the start of a bearish phase. That said, the outlook for USD is deemed as ‘negative’ and we expect USD to edge lower and test the 109.35 low seen in late June. All in, we expect USD to stay under pressure for now unless it can break above the ‘key resistance’ at 111.50”.