USD/JPY: Downward bias keeps gathering traction – UOB

Further retracement in USD/JPY in the short-term horizon remains in store for the time being, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to trade sideways between 134.70 and 135.55 yesterday. USD rose to 135.47 and then dropped sharply to a low of 134.10 in late NY trade. The increase in downward momentum is likely to lead to further USD weakness even though a clear break of last week’s low near 133.50 is unlikely today. Resistance is at 134.65, followed by 135.00.”

Next 1-3 weeks: “In our most recent narrative from Tuesday (09 May, spot at 135.10), we highlighted that the odds for USD to weaken further to 133.00 have diminished. We added, ‘However, only a breach of 135.85 would suggest that the weakness in USD has stabilized’. USD did not break 135.85 as it fell sharply from a high of 135.47 yesterday. After slowing for a few days, downward momentum is building again even though the likelihood of USD dropping to 133.00 has not increased much. On the upside, a break of 135.50 (‘strong resistance’ level previously at 135.85) would indicate 133.00 is not coming into view.”