According to UOB Group's FX Strategists, USD/JPY is now seen navigating the 114.80-115.90 range in the next weeks. Yesterday, we highlighted that USD ‘is likely to edge lower even though it is unlikely to challenge the major support at 114.40’. USD subsequently dropped 1 pip below 114.40 (low of 114.39) before staging a surprising sharp advance (high has been 115.69).
The advance appears to be running ahead of itself and further USD strength is unlikely. For today, USD is more likely to trade between 115.10 and 115.70.
In our latest narrative from Tuesday (22 Feb, spot at 114.75), we highlighted that there is room for USD to edge lower but it has to break 114.40 before a more sustained decline can be expected. Yesterday (24 Feb), USD dipped to 114.39 before soaring to a high of 115.69. The breach of our ‘strong resistance’ level at 115.30 indicates that the mild downward pressure has eased. The outlook appears to be neutral now and USD is expected to trade within a range of 114.80/115.90.