USD/JPY a drop below 106.50 appears unlikely – UOB

FX Strategists at UOB Group believe a pullback below the 106.50 level seems unlikely for the time being.

Key Quotes

24-hoour view: “The sharp and rapid decline from a high of 107.79 was unexpected. The sharp drop appears to have room to test 106.50 but a sustained move below this level seems unlikely (this level is followed by a rather strong support at 106.30). Resistance is at 107.10 but only a move back above 107.35 would indicate that the current decline has stabilized”.

Next 1-3 weeks: “Despite the sharp retreat in USD yesterday, it is too soon to expect a resumption of the recent bearish phase. We turned neutral on USD 2 days ago and there is no change to the view. We continue to expect USD to trade sideways for now, likely within a 105.80/108.30 range (instead of the 106.30/108.50 expected previously)”.