Extra weakness carries the potential to drag USD/JPY to the 131.65 level in the next weeks, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “USD lurched lower and nose-dived to 132.01 before rebounding to close at 132.87 (-1.67%). The rebound amidst oversold conditions suggests that USD is unlikely to weaken further. For today, USD is more likely to consolidate and trade between 132.30 and 133.60.”

Next 1-3 weeks: “Our view from Monday (08 Aug, spot at 135.40) where USD could advance to 136.00 was invalidated as USD plunged below our ‘strong support’ level at 134.00. Note that USD closed lower by a whopping 1.67% (NY close of 132.87), its largest 1-day drop since Nov 2021. While oversold shorter-term conditions could lead to a couple of days of consolidation first, the impulsive decline could extend to 131.65 later on. The current USD weakness is intact as long as USD does not move above 134.40 (‘strong resistance’ level).”