A visit to the 108.00 area in the very near-term remains well on the cards in USD/JPY, suggested FX Strategists at UOB Group.
24-hour view: “After trading in a relative quiet manner for a few days, USD lurched lower last Friday and cracked the major 108.40 support (low of 108.30). The rapid drop appears to be running ahead of itself but the improved downward momentum suggests the risk for USD is still on the downside. From here, barring a move above 108.90 (minor resistance at 108.70), USD could weaken towards 108.05. For today, a sustained decline below this level is not expected.”
Next 1-3 weeks: “It took a few days but the 108.40 level that was first indicated last Tuesday (28 Jan, spot at 108.95) finally came into the picture as USD dropped to 108.30. The price action is timely as we indicated earlier last Friday (31 Jan, spot at 108.95) that ‘USD has to move and stay below 108.60 within these 1 to 2 days or the odds for further weakness would diminish quickly’. While the weak daily closing in NY suggests the risk of a recovery has dissipated, downward momentum has not improved by as much as preferred. From here, further USD weakness would not be surprising but at this stage, the prospect for a move to last month’s low near 107.65 is not high. On the upside, the ‘strong resistance’ level has moved lower to 109.15 from last Friday’s level of 109.50.”