USD/JPY still risks a drop to 125.60 – UOB

Further decline in USD/JPY is likely and could retest the 125.60 region in the next weeks, noted FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the rapid drop appears to be overdone and USD is unlikely to weaken further’ and we expected USD consolidate and trade between 126.40 and 127.40. USD subsequently traded between 126.63 and 127.49. We continue to view the price actions as part of a consolidation even though the slightly firmed underlying tone suggests a higher range of 126.90/127.60.”

Next 1-3 weeks: “Our update from yesterday (25 May, spot at 126.95) still stands. As highlighted, the oversold decline in USD has room to extend to 126.00, possibly 125.60. On the upside, a breach of 127.90 (no change in ‘strong resistance’ level was from yesterday) would indicate that the weakness in USD that started about two weeks ago has run its course.”