USD/JPY: Dwindling bets for further weakness – UOB

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, extra losses in USD/JPY appear unlikely for the time being.

Key Quotes

24-hour view: Yesterday, we expected USD to trade in a range between 138.20 and 139.30. However, USD dropped to 137.69 and then rebounded to a high of 139.13. The underlying tone has improved a tad. Today, USD could edge higher, but it is unlikely to break clearly above 139.50. Support is at 138.40, followed by 138.00.

Next 1-3 weeks: We turned negative USD early last week. After USD fell to 137.23 and rebounded, in our latest narrative from Monday (17 Jul, spot at 138.55), we indicated that “while the recent downward momentum has slowed somewhat, only a break of 139.50 would indicate that the USD weakness has stabilized.” Yesterday, USD dipped to 137.69 and then rebounded strongly. Downward momentum has waned further, and the chance of USD dropping to the major support at 137.15 this time around is slim. Looking ahead, if USD breaks above 139.50, it would suggest that USD could trade in a range for a period of time.