Further downside could force USD/JPY to retest the 126.35 level in the near term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘downward momentum appears to be slowing and this coupled with deeply oversold conditions suggests USD is unlikely to weaken much further’ and we expected USD to ‘trade between 127.40 and 129.25’. USD subsequently dipped to 127.21, rebounded to a high of 128.86 before closing at 128.54 (+0.52%). We view the price actions as part of a consolidation and expect USD to trade within a range of 127.85/129.05 today.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (16 Jan, spot at 128.00). As highlighted, the risk for USD remains on the downside, and the next level to watch is 126.35. On the upside, a breach of 130.05 (no change in ‘strong resistance’ level) would indicate that USD is not weakening further.”