Further downside could drag USD/JPY to retest the 137.70 region in the next few weeks, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “While we expected a lower USD yesterday, we did not expect a break of the strong support at 140.30. However, USD cracked 140.30 and plunged to a low of 139.15. Impulsive downward momentum indicates further decline. The level to watch is at 138.50, followed by 137.70. The latter level is unlikely to come into view today. Resistance is at 139.80, followed by 140.30.”

Next 1-3 weeks: “After USD soared above 142.00, we indicated on Tuesday (22 Nov, spot at 141.80) that upward momentum is building. However, we were of the view that USD has to break and hold above 142.50 before further gains are likely. USD did not challenge 142.50 but instead, dropped below our ‘strong support’ level of 140.30 yesterday. The sharp and swift drop has shifted the risk to the downside towards 137.70. On the upside, the ‘strong resistance’ at 140.80 is likely to come under challenge, at least for the next 1 to 2 days.”