USD/JPY: Room for a test of the 106.25 level – UOB

According to FX Strategists at UOB Group, USD/JPY could slip back to the 106.25 level in the next weeks.

Key Quotes

24-hour view: “The sudden lurch lower in USD came as a surprise as it dropped to 106.67 before closing at 106.76 (-0.44%), its largest 1-day decline in 1-1/2 months. Despite the relatively large drop, downward momentum has not improved by all that much. That said, there is scope for USD to dip to 106.50 (next support is at 106.25). Resistance is at 107.05 followed by 107.25.”

Next 1-3 weeks: “We have held the same view since last Wednesday (15 Jul, spot at 107.25) wherein the outlook for USD is mixed and it ‘could trade between 106.70 and 107.70 for a while’. After trading in a quiet manner for about a week, USD dipped below the bottom of the expected range yesterday (low of 106.67). Downward momentum has ticked up and from here, USD could drift lower but in view of the nascent buildup in momentum, any weakness may struggle to move below 106.25. On the upside, only a break above 107.50 would indicate the current mild downward pressure has eased.”