USD/JPY downside pressure could test 111.00 – UOB

The pair stays within a neutral stance in the near term, while it could visit the 111.00 handle in the near term, according to FX Strategists at UOB Group.

Key Quotes

“Expectation for USD to form a short-term base was wrong as the break of the strong support at 112.00 resulted in a sharp drop to a low of 111.66. While the decline is over-extended, it is too early to expect a significant recovery. USD is more likely to consolidate its loss and trade sideways at these lower levels, likely between 111.55 and 112.30”.

“While we have held the view that USD is ‘under pressure’ since earlier this week, the ease of which the strong support at 112.00 was breached comes as a surprise (overnight low of 111.66). Downward pressure has increased further and a move towards the major support at 111.00 would not be surprising. At this stage, we view the USD decline from the 114.49 high seen earlier this month as a ‘correction’ and do not expect a sustained move below 111.00. Resistance is at 112.50 but only a move back above 113.00 would indicate that the downward pressure has eased”.