USD/JPY potential visit to 111.20 still on the cards – UOB

FX Strategists at UOB Group keep the neutral stance on spot, adding that a test of 111.20 remains in the pipeline for the time being.

Key Quotes

24-hour view: “We expected USD to trade sideways last Friday and the sharp and rapid drop to 111.36 and the subsequent swift and strong bounce from the low came as a surprise. While the underlying tone has softened, any weakness from here is unlikely to threaten the 111.36 low (111.55 is already a strong support level). Resistance is at 112.15 followed by 112.40”.

Next 1-3 weeks: “We detected the softness in the underlying tone in USD last Thursday (25 Oct, spot at 112.10) and highlighted, “a break of 111.80 would suggest further USD weakness to 111.20”. USD cracked 111.80 during NY hours last Friday and plummeted to a low of 111.36. The decline was however short-lived as it staged a strong rebound from the low but still closed markedly weaker for the day (NY close of 111.89, -0.45%). From here, the focus is at 111.20 even though this level may not come into the picture so soon. Only a break of 112.65 (‘key resistance’ previously at 112.80) would indicate that the current downward pressure has eased.