USD/JPY is now expected to navigate within 136.60-139.00 range in the next weeks, noted FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “While we expected USD to strengthen yesterday, we were of the view that ‘a sustained rise above 138.60 is unlikely’. USD subsequently rose to a high of 138.87 before staging a surprisingly sharp sell-off (low of 137.28 during late NY session). The rapid drop could extend but in view of the oversold conditions, the major support at 136.60 is unlikely to come under threat (there is another support at 137.00). On the upside, a breach of 137.95 (minor resistance is at 137.60) would indicate that USD is unlikely to weaken further.”

Next 1-3 weeks: “We highlighted on Wednesday (20 Jul, spot at 138.15) that the recent upward pressure has eased and we expected USD to consolidate and trade between 136.60 and 139.40. USD rose to a high of 138.87 yesterday (21 Jul) before dropping sharply. The underlying tone has weakened somewhat but we continue to expect USD to consolidate for now, albeit likely within a narrower range of 136.60/139.00. Looking ahead, if USD breaks clearly below 136.60, it could trigger a deep pullback.”