Extra weakness appears the name of the game for USD/JPY for the time being, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.
24-hour view: The sharp and swift drop that sent USD plummeting to a low of 148.13 came as a surprise (we were expecting range-trading). Not surprisingly, the decline is severely oversold. However, there is scope for USD to drop to 147.60 before stabilisation can be expected. Today, the next support at 147.35 could be out of reach. On the upside, if USD breaks above 148.90 (minor resistance), it would indicate the weakness has likely stabilised.
Next 1-3 weeks: After USD dropped to 149.18 the previous day, we highlighted yesterday (20 Nov, spot at 149.90) that “the increase in downward momentum is not enough to suggest that USD is ready to head lower in a sustained manner.” We were of the view that USD must break clearly below the major support near 148.90 before a sustained decline is likely. We did not anticipate the sharp selloff as USD broke below 148.90 and plunged to 148.13. There is a clear increase in momentum, and USD is likely to decline further to 147.35. The risk of further USD decline will remain as long as it does not break above 149.70 (‘strong resistance’ level was at 151.10 yesterday).