USD/JPY seems to have opened the door to a probable move to the 127.50 region in the next weeks, suggested FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Our view for USD to ‘trade sideways between 128.80 and 129.80’ yesterday was incorrect as USD plummeted to 128.00. The swift build-up in momentum is likely to lead to further USD weakness even though oversold conditions suggest that a break of the major support at 127.50 is unlikely. On the upside, a breach of 128.85 (minor resistance is at 128.55) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “Last Thursday (12 May, spot at 128.80), we highlighted that USD is likely to trade above 127.50 for a couple of days first before staging a deeper pullback. USD subsequently rebounded and in our latest narrative from Tuesday (17 May, spot at 129.15), we highlighted that the chance for USD to move below 127.50 has diminished. USD dropped sharply to 128.00 during NY session yesterday and the boost in downward momentum suggests USD could break 127.50. The next support is at 127.00. The downside risk is intact as long as USD does not move above 129.30 (‘strong resistance’ level previously at 129.90).”