USD/JPY: A deeper pullback is likely below 130.00 – UOB

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, USD/JPY risks a move lower if the pair breaches the 130.00 support.

Key Quotes

24-hour view: “We highlighted yesterday that USD could ‘weaken to 132.00 before stabilization is likely’. The anticipated weakness exceeded our expectations as USD dropped to 131.58 before extending its decline during early Asian hours. Solid downward momentum suggests further USD weakness would not be surprising. However, it is left to be seen if the next major support at 130.00 would come into the picture today (there is another support at 130.50). Resistance is at 131.45 followed by 131.90.”

Next 1-3 weeks: “We turned negative USD last Thursday (28 Jul, spot 135.90). In our latest narrative from yesterday (01 Aug, spot at 132.90), we highlighted that USD is likely to continue to weaken. We indicated the support levels are at 132.00 and 131.70. The pace and extent of the anticipated decline exceeded our expectations as USD subsequently plummeted to 131.58 before extending its decline during Asian hours. We continue to expect USD to weaken. A break of 130.00 could trigger further decline to 128.00. Overall, only a break of 132.90 (‘strong resistance’ level was at 134.55 yesterday) would indicate that the current weakness has stabilized.”