USD/JPY: Further downside remains on the table – UOB
FX Strategists at UOB Group sees USD/JPY losing further ground in the next weeks.
24-hour view: “USD dropped below the bottom of our expected ‘lower trading range of 109.65/110.60’ as it touched 109.56 (before extending its decline after NY close). The rapidly improving downward momentum suggest further weakness is likely even though the strong support at 109.00 may not be easy to break. All in, USD is expected to stay under pressure unless it can move above 110.10 (minor resistance is at 109.85).”
Next 1-3 weeks: “We indicated on Tuesday (25 Feb, spot at 110.90) that ‘a temporary top is in place’ and expected USD to ‘trade in a choppy manner and within a broad range’. However, USD cracked the bottom of our expected range at 109.64 yesterday (27 Feb) as it surrendered all of its outsized gain from last week (low of 110.45). From here, last week’s 112.21 high could be a more significant top than expected previously and the risk is for further USD weakness. However, at this stage, it is premature to expect a move towards the critical mid-term support at 108.30 (there is another strong support at 108.70). Overall, the current downward pressure is deemed as intact unless USD can move back above 110.45.”