Further downside pressure could drag USD/JPY to the 127.00 area in the next weeks, commented FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “Last Friday, USD traded sideways within a relatively narrow range between 127.52 and 128.29 before closing largely unchanged at 127.85 (+0.04%). The movement is likely part of an ongoing consolidation phase. In other words, USD could continue to trade sideways, expected to be within a range of 127.35/128.35.”

Next 1-3 weeks: “USD dropped sharply to 127.01 last Thursday before rebounding. While downward momentum has eased somewhat, there is room for USD to retest the 127.00. 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 breach of 128.90 (‘strong resistance’ level) would indicate that the current downward pressure has eased.”