USD/JPY carries the potential to slip back to the 106.00 region in the next weeks, noted FX Strategists at UOB Group.
24-hour view: “The sudden sharp decline in USD that sent it plummeting to a 6-week low of 106.54 came as a surprise. Robust downward momentum suggests further USD weakness is likely. From here, barring a move back above 107.05 (minor resistance is at 106.90), USD is expected to weaken further to 106.25 (next support is at 106.00).”
Next 1-3 weeks: “While we noted yesterday (28 Apr, spot at 107.30) that ‘downward momentum is beginning to pick-up’, we held the view that ‘it is too early to expect a sustained decline in USD’. We highlighted that ‘only a NY closing below 106.70 would indicate that USD is ready to move to 106.00’. USD subsequently dropped to 106.54 before ending the day at 106.86. While the NY closing is not as weak as preferred, the price action suggests USD is likely to weaken to 106.00. Only a breach of the ‘strong resistance‘at 107.35 would indicate that our view is wrong.”