In light of the recent price action, the prospects for further decline in USD/JPY appear diminished, commented FX Strategists at UOB Group.
Key Quotes
24-hour view: “We highlighted yesterday (17 Sep, spot at 109.75) that ‘conditions remain oversold and this coupled with the rapid bounce indicates that USD is unlikely to weaken further’ and we expected USD to ‘consolidate and trade between 109.15 and 109.65’. While our view that USD is unlikely weaken further is correct, we did not anticipate the rapid rise during NY session to 109.82. The advance has room to extend but a clear break of the major resistance at 110.05 is unlikely (next resistance is at 110.25). Support is at 109.60 followed by 109.45.”
Next 1-3 weeks: “On Wednesday (15 Sep, spot at 109.60), we highlighted that USD ‘has to close below 109.30 before a sustained decline can be expected’. After USD dropped to 109.09 (but did not close below 109.30), we highlighted yesterday (16 Sep, spot at 109.40) that ‘we prefer to wait for a daily closing below 109.30 before adopting a more negative stance in USD’. USD subsequently rebounded to a high of 109.82 during NY session. While our ‘strong resistance’ level at 109.90 is not breached, downward momentum has more or less fizzled out. In other words, the downside risk has dissipated. USD has likely ‘lapsed’ back into a consolidation phase and could trade between 109.30 and 110.25 for now.”
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