USD/JPY clings to the rangebound theme near term – UOB

UOB Group’s FX Strategists noted USD/JPY returned to the consolidative mood after failing to break above the mid-110.00s.

Key Quotes

24-hour view: “The sharp and rapid drop in USD to 109.61 yesterday came as a surprise (we were expecting USD to trade between 110.00 and 110.40). While already oversold, the weakness in USD could dip below 109.50 first before stabilization can be expected. The major support at 109.30 is unlikely to come under threat. Resistance is at 109.90 followed by 110.10.”

Next 1-3 weeks: “Our latest narrative was from Wednesday (08 Sep, spot at 110.25) where we highlighted ‘upward momentum is beginning to improve and the risk of a break of 110.55 has increased’. We added, ‘if 109.95 is breached within these few days, it would indicate that USD is still ‘caught’ in a 109.30/110.55 range’. USD subsequently rose to 110.44 but yesterday, it staged a surprisingly sharp decline and cracked 109.95 (low of 109.61). The build-up in momentum has fizzled out quickly and the overall price actions suggest that USD is still consolidating within a range of 109.30/110.55.”