UOB Group’s FX Strategists noted USD/JPY remains side-lined within the 109.10-110.30 range for the time being.
24-hour view: “We highlighted yesterday that ‘waning downward momentum coupled with oversold conditions suggests limited downside risk for USD’ and we expected USD to ‘consolidate and trade between 109.10 and 109.70’. However, instead of consolidating, USD rose to 109.89 before closing on a firm note at 109.78 (+0.52%). While the rapid rise appears to be running ahead of itself, USD could edge above 110.00 first before easing. The next resistance at 110.30 is not expected to come unto the picture. Support is at 109.55 followed by 109.35.”
Next 1-3 weeks: “Yesterday, we highlighted that ‘downward momentum has not improved by much’ and we were of the view that USD ‘has to close below 109.10 before a sustained decline can be expected’. We added, ‘the prospect for a daily closing below 109.10 is not high for now but would remain intact as long as USD does not move above 110.00 within these few days’. While 110.00 is not breached (overnight high of 109.89), the rapid loss in downward momentum indicates that the chance for USD to close below 109.10 has dissipated. In other words, USD is still in a consolidation phase and could trade between 109.10 and 110.30 for a period of time.”
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