USD/JPY: Downward pressure seems mitigated – UOB

The likelihood of extra losses in USD/JPY now appears dwindled, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: Yesterday, we noted that “the underlying tone seems to have improved somewhat”, and we were of the view that USD “could edge higher, but it is unlikely to reach 147.80.” Our view was not wrong, even though USD came close to reaching 147.80 (high has been 147.72). The mild upward pressure appears to have eased. Today, USD is likely to consolidate, probably in a range of 146.80/147.65. 

Next 1-3 weeks: Our latest narrative was from two days ago (12 Sep, spot at 146.70) that while USD could pullback further, the likelihood of a clear break below 145.50 is not high. We indicated that “if USD breaks above 147.80, it would indicate that it is not ready to pullback further.” Yesterday, USD rose to a high of 147.72. While our ‘strong resistance’ level has not been breached, the mild downward pressure is beginning to ease, and the odds of USD pulling back further have diminished. However, only a clear break of 147.80 (no change in ‘strong resistance’ level) would suggest that USD is not pulling back further.