USD/JPY bearish on a close below 108.55 – UOB

In view of FX Strategists at UOB Group, the pair’s outlook should shift to bearish on a daily close below 108.55.

Key Quotes

24-hour view: “USD traded in a ‘quiet’ manner yesterday but plunged after NY close on the back of North Korea ‘missiles news’. The rapid and sharp drop to a low of 108.32 was short-lived as USD staged a rapid rebound. Despite the recovery, there is no sign of stabilization just yet and a retest of the 108.30/35 level would not be surprising (next support is at the year’s low near 108.10). Resistance is at 109.10 followed by 109.40. The latter level is acting as a very strong resistance now and is unlikely to yield so easily, not today nor in the next few days”.

Next 1-3 weeks: “We have held the same view that USD is “under pressure unless it can reclaim 110.00” since last Monday. However, we expected 108.55/60 to offer solid support and the ease of which this level was taken out early this morning (after North Korea missiles news) came as a surprise. Downward momentum has clearly picked but we prefer to wait for a daily closing below 108.55 before adopting a bearish stance. A shift to a bearish phase would have an immediate target of 107.50 (with strong ‘intervening support at 108.10’). The odds for such a move are not high at this stage but would continue to improve unless USD can reclaim 109.40 within these few days”.