USD/JPY risks a drop to 125.60 near term – UOB

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, further downside in USD/JPY could reach the 125.60 region in the next weeks.

Key Quotes

24-hour view: “The sharp drop in USD to 126.35 and the subsequent bounce from the low came as a surprise (we were expecting sideway-trading). The rapid drop appears to be overdone and USD is unlikely to weaken further. For today, we expect USD to consolidate and trade between 126.40 and 127.40.”

Next 1-3 weeks: “Our latest narrative was from Monday (23 May, spot at 127.90) where there is room for USD to retest the 127.00 level. We added, ‘a breach of this level is not ruled out but at this stage but any further decline is expected to face solid support at 126.50’. USD cracked 127.00 yesterday and plummeted to 126.35 before rebounding. While oversold, the decline has room to extend to 126.00, possibly 125.60. Overall, only a break of 127.90 (‘strong resistance’ level was at 128.55 yesterday) would indicate that weakness in USD that started about two weeks ago has run its course.”