The upside momentum in USD/JPY appears to be running out of steam, noted FX Strategists at UOB Group.
24-hour view: “USD traded between 108.45 and 108.93 yesterday, lower than our expected sideway-trading range of 108.50/109.00. The underlying tone has weakened and the risk for today is tilted to the downside. From here, barring a move above 109.00 (108.85 is already quite a strong level), USD is expected to weaken to 108.35, possibly 108.10”.
Next 1-3 weeks: “USD eked out a fresh high of 108.93 before retreating to end the day slightly lower at 108.65 (-0.09%). For now, there is no change in our view from Wednesday (16 Oct, spot at 108.80) wherein the positive USD outlook is still intact and a break of 109.00 would shift the focus to 109.30. However, as highlighted, in view of overbought conditions, USD could ill afford to dither as a consolidation at these elevated levels would quickly increase the risk of short-term top. From here, unless USD cracks 109.00 and stays above this level by end of today’s NY session, a breach of 108.10 (no change in ‘strong support’ level) would indicate a short-term top is in place. In other words, the odds for further USD strength have diminished”.
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