USD/JPY looks for extra consolidation – UOB

USD/JPY stays neutral for the time being and remains poised to extend the prevailing sideline theme, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “The quiet trading in USD yesterday offers no fresh clues. The consolidation phase appears incomplete and further range trading is expected, likely between 109.50 and 110.10”.

Next 1-3 weeks: “Despite the sharp decline in USD that hit 108.48 last Thursday (31 Jan), we indicated last Friday (01 Feb, spot at 108.90) that “we have doubts about the sustainability of JPY weakness and we prefer to wait for a NY closing below 108.60 before adopting a negative stance”. That said, the subsequent sharp recovery was not exactly expected (USD touched a 1-month high of 110.15 earlier this week). The recovery lacks momentum and is viewed as part of a broad consolidation phase. In other words, we have doubts now on the sustainability of the current USD strength. In our view, USD is more likely to trade sideways for now, likely within a relatively broad 109.00/110.30 range”.