USD/JPY eyes a test of 105.50 near term – UOB

FX Strategists at UOB Group remain neutral on spot and believe there is still room for a test of the mid-105.00s.

Key Quotes

24-hour view: “In line with expectation, USD took out last week’s 106.36 low but did not have enough momentum to challenge the next support at 105.80 (overnight low has been 106.15). Downward momentum has picked and from here, a push lower towards 105.80 would not be surprising but at this stage, we do not expect a sustained move below this level (next support is at the year-to-date low near 105.50). On the upside, only a move back above 106.80 would indicate that the immediate downward pressure has eased (minor resistance is at 106.50)”.

“While the 106.15 low yesterday is above the bottom of our expected 105.80/108.30 consolidation range, downward momentum is picking up rapidly and the immediate pressure has shifted to the downside. However, it is too early to expect the start of a bearish phase but the short-term weakness within the current neutral phase has scope to retest the strong 105.50 support. Overall, downward pressure is expected to improve further unless USD can reclaim 107.20 within the next few days. Looking further ahead, a break of 105.50 could lead to further weakness towards 104.50”.