USD/JPY risks a deep pullback below 109.50 – UOB

USD/JPY could extend the drop to the 109.20 level if 109.50 is cleared in the near term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for USD to ‘dip below 109.50’ did not materialize as it rebounded to110.25 (low has been 109.72). The rapid rebound appears to be running ahead of itself and USD is unlikely to strengthen much further. For today, USD is more likely to trade between 109.85 and 110.30.”

Next 1-3 weeks: “We have expected USD to weaken since the middle of last week. In our latest narrative from last Friday (09 Jul, spot at 109.85), we highlighted that ‘a clear break of 109.50 would open the way for a move lower to 109.20’. There is no change in our view for now even though shorter-term downward momentum has waned somewhat. Only a break of 110.55 (no change in ‘strong resistance’ level) would indicate that USD is not ready to break 109.50 just yet.”