USD/JPY room for a test of 104.00 – UOB

In opinion of FX Strategists at UOB Group, the pair stays neutral near term while a drop to the 104.00 region is not ruled out.

Key Quotes

24-hour view: “We expected “another dip towards 104.50” last Friday but USD only managed to touch a low of 104.62. While downward momentum is beginning to wane, it is too soon to expect a sustained recovery. We continue to see chance for a test of 104.50 before a rebound can be expected (next support is at 104.25). Resistance is at 105.05 followed by 105.35”.

Next 1-3 weeks: “We have been holding the same view since Monday (19 Mar, spot at 105.90) that “a retest of 105.25 seems likely”. USD touched a low of 105.23 in NY yesterday but fear of a trade war sent it plummeting to a low 104.66 early this morning. The rapid drop appears to be running ahead of itself and we are not convinced that the current month-long neutral phase has shifted to bearish. That said, the immediate outlook is clearly ‘negative’ and it is premature to expect a sustained recovery. Only a move back above 105.70 would indicate that the current downward pressure has eased. Until then, USD could continue to probe lower towards the next support at 104.00 but the prospect for a sustained move below this level is not high at this stage”.