USD/JPY: Extra gains seen below 104.70 – UOB

USD/JPY risks a deeper pullback if the 104.70 support is cleared in the near-term, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for USD to consolidate was wrong as it dropped to a low of 105.02 before closing on a soft note at 105.15 (-0.30%). While quickly reaching oversold territory, there is room for the weakness in USD to probe the month-to-date low near 104.90 first before a rebound can be expected. For today, a sustained decline below this level is unlikely (next support is at 104.70). Resistance is at 105.35 but only a break of 105.50 would indicate the current downward pressure has eased.”

Next 1-3 weeks: “Yesterday, we indicated that the outlook for USD is mixed and held the view that it ‘could trade between 105.00 and 106.00 for a period of time’. The rapid manner by which it approaches the bottom of the range was not exactly expected (overnight low of 105.02) and downward momentum has improved a tad. While the bias is tilted to the downside, USD has to close below 104.70 before a sustained decline can be expected. For now, the prospect for such a move is not high but it would increase quickly as long as USD does not move above 105.70 within these few days.”