USD/JPY: Extra losses seen below 109.00 – UOB

In opinion of FX Strategists at UOB Group, USD/JPY could extend the drop to the 108.70 area if 109.00 is cleared in the near term.

Key Quotes

24-hour view: “We highlighted yesterday that USD ‘could weaken further to 109.25’. We added, ‘the next support at 109.00 is unlikely to come into the picture’. While our view for USD to weaken was not wrong, USD easily took out 109.25 as it dropped to 109.10. While oversold, the weakness has room to test 109.00 first before stabilization can be expected. For today, a sustained decline below 109.00 is unlikely. On the upside, a breach of 109.55 (minor resistance is at 109.40) would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Yesterday (16 Aug, spot at 109.55), we highlighted that ‘risk has shifted quickly to the downside’ and USD ‘could weaken to 109.00’. USD subsequently dropped to 109.10 before settling on a soft note at 109.23 (-0.31%). There is no change in our view and a break of 109.00 would shift the focus to the month-to-date low near 108.70. The downside risk is deemed intact as long as USD does not move above 109.90 (‘strong resistance’ level was at 110.15 yesterday).”