USD/JPY: short-term top in place? – UOB

According to FX Strategists at UOB Group, there is the chance that USD/JPY could have topped around 108.50.

Key Quotes

24-hour view: “Expectation for USD to “trade sideways” last Friday was incorrect as it dropped sharply to 107.51. Despite the subsequent bounce from the low, the underlying tone remains weak. From here, barring a move back above 108.00 (minor resistance at 107.80), USD could weaken further to 107.30. For today, the next support at 107.00 is not expected to come into the picture”.

Next 1-3 weeks: “The sharp drop of -0.41% last Friday (NY close 107.55) has increased the risk of a short-term top. However, only a break of 107.50 (no change in ‘strong support’ level) would indicate that the recovery phase that started more than 2 weeks ago has run its course. In other words, a break of 107.50 would suggest that last Wednesday (18 Sep) high of 108.47 is a short-term top. From here, unless USD can move stay above 108.00 by end of today’s NY session, a break of 107.50 would not be surprising. Looking ahead, a breach of 107.50 would indicate the start of a consolidation phase and USD would then likely to trade sideways to slightly lower for a period”.