In opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, further downside in USD/JPY could see the 128.30 area retested in the near term.

Key Quotes

24-hour view: “We expected USD to ‘trade between 129.60 and 130.35’ yesterday. USD rose to 130.37 during NY session before plunging sharply to a low of 128.61. The rapid decline appears to be overdone and USD is unlikely to weaken further. For today, USD is more likely to consolidate and trade between 128.60 and 129.80.”

Next 1-3 weeks: “Yesterday (04 May, spot at 130.10), we highlighted that upward momentum is beginning to wane and USD is likely to consolidate between 129.00 and 131.25. We did not anticipate the subsequent sharp sell-off to 128.61. The decline is likely part of a pullback that could extend to 128.30, possibly 127.50. Overall, only a breach of 130.15 (‘strong resistance’ level) would indicate that the current downward pressure has eased.”