USD/JPY risks a deeper pullback below 109.30 – UOB

The downside momentum in USD/JPY is expected to accelerate on a close below the 109.30 level in the near term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “The sharp drop in USD to 109.51 yesterday came as a surprise (we were expecting USD to trade sideways). While the rapid drop is oversold, the weakness is not showing signs of stabilizing. In other words, USD could weaken further even though oversold conditions suggest that any weakness is unlikely to break the major support at 109.30. Resistance is at 109.85 followed by 110.00.”

Next 1-3 weeks: “We have expected USD to trade between 109.30 and 110.55 for about a month now. USD dropped sharply yesterday and downward momentum is beginning to improve. While the downside risk has increased, USD has to close below 109.30 before a sustained decline can be expected (next support is at 109.00). On the upside, a breach of 110.15 would indicate that USD is not ready to head lower just yet.”