USD/JPY: A drop to 127.00 still remains on the cards – UOB

A corrective downside in USD/JPY could visit the 127.00 zone in the next weeks, commented FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “We expected USD to ‘trade sideways within a range of 127.35/128.35’ yesterday. USD subsequently traded between 127.13 and 128.05 before closing largely unchanged at 127.87 (+0.02%). The price action still appears to be part of a consolidation and we expect USD to trade between 127.20 and 128.20 for today.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (23 May, spot at 127.90). As highlighted, while downward momentum has eased, there is room for USD to retest the 127.00 level. A breach of this level is not ruled out but at this stage but any further decline is expected to face solid support at 126.50.  Overall, only a break of 128.55 (‘strong resistance’ level was at 128.90 yesterday) would indicate that the current downward pressure has eased.”