USD/JPY remains poised for some near-term side-lined trading prior to a potential drop to the 131.65 area, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.
24-hour view: “Our view for USD to ‘consolidate and trade between 132.30 and 133.60’ was incorrect as it dropped sharply to 131.72 before rebounding strongly to end the day slightly higher at 133.00 (+0.10%). The strong rebound amidst slowing downward momentum suggests USD is unlikely to weaken further. For today, USD is more likely to trade sideways between 132.30 and 133.80.”
Next 1-3 weeks: “We highlighted yesterday (11 Aug, spot at 132.85) that USD could consolidate for a couple of days first before declining to 131.65. USD subsequently dropped to 131.72 before rebounding strongly. We continue to see room for USD to decline to 131.65. A break of this level would shift the focus to 130.40. On the upside, a breach of 134.40 (no change in ‘strong resistance’ from yesterday) would indicate that USD is unlikely to weaken further.”