USD/JPY: Upside bias reinforced above 114.75 – UOB

USD/JPY needs to regain 114.75 to mitigate downside pressure, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that ‘the weakness in USD has yet to stabilize but any further decline is unlikely to break the major support at 113.60’. However, USD plummeted to 113.47 before rebounding strongly. The rebound has scope to extend but a break of the strong resistance at 114.75 is unlikely (minor resistance is at 114.50). On the downside, a breach of 113.90 would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “After USD dropped sharply, we highlighted last Friday (14 Jan, spot at 114.10) that while there is room for USD to weaken further, shorter-term conditions are deeply oversold and any decline is expected to encounter solid support at 113.60. USD subsequently plummeted to 113.47 before rebounding. Conditions remain oversold and this coupled with the sharp bounce suggests that the prospect for further USD weakness is not high. However, only a break of 114.75 (no change in ‘strong resistance’ level) would indicate that the downside risk has dissipated.”