USD/JPY is expected to meet solid support around 113.60 – UOB

Extra decline in USD/JPY is seen facing a tough barrier around 113.60 in the next weeks, suggest FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘test 114.30’ yesterday and we were of the view that ‘the next support 114.00 is not unlikely to come into the picture’. The subsequent weakness exceeded our expectations as USD dropped to 113.98 before settling on a soft note at 114.17 (-0.40%). While deeply oversold, the weakness in USD has yet to stabilize. That said, any further decline is unlikely to break the major support at 113.60 (there is another support at 113.80). Resistance is at 114.30 but only a breach of 114.50 would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “We highlighted yesterday (13 Jan, spot at 114.60) that downward momentum is beginning to improve but USD has to close below 114.30 before a sustained decline can be expected. USD subsequently dropped to 113.98 before closing at 114.17 (-0.40%). While there is room for USD to weaken further, shorter-term conditions are deeply oversold and any decline is expected to encounter solid support at 113.60. Resistance is at 114.50 but only a breach of 114.75 would indicate that the current downside risk has dissipated.”