USD/JPY stays neutral, further consolidation expected – UOB

FX Strategists at UOB Group noted the pair is likely to extend its consolidative theme in the near term.

Key Quotes

24-hour view: “We highlighted yesterday that further USD strength “above 105.80 seems likely but 106.05 is likely out of reach”. In line with expectation, USD touched a high of 105.90 before easing off. Upward pressure has clearly eased and the current price action is viewed as the early stages of a consolidation phase. In other words, we expect USD to trade sideways for today; likely within a 105.05/105.85 range”.

Next 1-3 weeks: “Despite the sharp decline late last week, we highlighted that we are “not convinced that the current month-long neutral phase has shifted to bearish”. However, the sharp and swift bounce yesterday came as a surprise. Downward pressure has eased and the 104.55 low registered early yesterday is likely a short-term low. There is no change to the neutral outlook but instead of ‘probing’ the next support at 104.00 (as expected previously), USD has likely moved into a broad 104.80/106.65 range. After the sharp rebound yesterday, the short-term bias is tilted to the upside but 106.65 is a major level and is unlikely to yield so easily”.