USD/JPY upside appears to be losing traction – UOB

In view of FX Strategists at UOB Group, extra gains in USD/JPY looks unlikely for the time being.

Key Quotes

24-hour view: “We held the view last Friday that “USD could weaken to 108.35, possibly 108.10”. However, USD only dipped to 108.37 before ending the day at 108.42. The weak opening this morning suggests the short-term risk is on the downside. From here, barring a move above 108.70, USD is expected to test the 108.10 support. For today, the prospect for a sustained decline below this level is not high”.

Next 1-3 weeks: “While our ‘strong support’ level at 108.10 is still intact, the weak daily closing last Friday (108.42, -0.21%) is enough to indicate that the USD strength that started more than a week ago has run its course. The price action was not surprising as we cautioned last Friday (18 Oct, spot at 108.65) that the “odds for further USD strength have diminished”. From here, USD is likely to consolidate and trade sideways within a 107.80/109.00 range. Looking ahead, there is no pre-indication on which side of the trading range is more vulnerable”.