USD/JPY’s weakness has slowed a little following the aggressive sell-off in Q4. Economists at Credit Suisse expect the pair to eventually find a floor at key support at 127.53/27.

Resistance at 138.14/18 is expected to cap

“Whilst a near-term consolidation phase should be allowed for, resistance at 138.14/18 is expected to cap and strength, if seen, will be seen as temporary and our broader outlook stays negative for further weakness in Q1 back to 129.62, then our core target of the ‘neckline’ to the multi-year base and 50% retracement of the 2020/2022 uptrend at 127.47/27. We would then look for a potentially major floor here.”

“Should weakness directly extend below 127.27/126.36 we would see support next at the 61.8% retracement at 121.44.”