USD/JPY room for a test of 108.30 – UOB

In opinion of FX Strategists at UOB Group, the pair could slip back to the 108.30 region in the next weeks.

Key Quotes

24-hour view: “We highlighted last Friday that USD is expected “test the major 108.80 support” and added that “an intraday dip below this level is not ruled out but a break of the next support at 108.50 is not expected”. In line with expectation, USD rebounded strongly after hitting a low of 108.62. While the strong recovery suggests that a short-term low is in place, it is too soon to expect a sustained up-move. That said, the improved undertone suggests there is scope for USD to grind higher from here but strong resistance is expected at 109.50. On the downside, the 108.62 low is acting as a very strong support now (minor support is at 108.80)”.

Next 1-3 weeks: “As highlighted last Friday (04 May, spot at 109.15), a break of 108.80 would indicate that USD has made a short-term top at 110.02 last Wednesday, 02 May (USD subsequently hit a low of 108.62 during NY hours on Friday). However, there is no change to the current neutral outlook for USD but the current pull-back has scope to extend lower to 108.30 in the coming days (with lower odds for extension to 107.90). Only a break above the ‘key resistance’ at 109.85 would indicate that the immediate downward pressure has eased. On a shorter-term note, 109.50 is already a rather strong resistance”.