USD/JPY: Further consolidation ahead of extra losses? – UOB

USD/JPY could attempt to consolidate prior to a potential decline to the 131.65 level in the next weeks, comment FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘slowing downward momentum suggests USD is unlikely to weaken further’ and we expected USD ‘to trade sideways between 132.30 and 133.80’. USD subsequently trade within a narrower range than expected (132.87/133.89). The underlying tone has softened somewhat and USD is likely to edge lower. However, the support at 132.40 is unlikely to come under threat (minor support is at 132.70). Resistance is at 133.55 followed by 133.80.”

Next 1-3 weeks: “Last Thursday (11 Aug, spot at 132.85), we highlighted that USD could consolidate for a couple of days first before declining to 131.65. While downward momentum has waned somewhat, there is no change in our view for now. Overall, only a breach of 134.40 (no change in ‘strong resistance’ from last Friday) would indicate that USD is unlikely to weaken further.”

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