USD/JPY could extend the drop to 133.50 – UOB

Further corrective downside could drag USD/JPY to the 133.50 region in the short-term horizon, commented FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “The sharp sell-off that sent USD plunging to a low of 134.25 came as a surprise (we were expecting sideway-trading). While the rapid drop appears to be running ahead of itself, the downside risk is still intact. That said, any weakness is unlikely to break 134.00. On the upside, a breach of 135.65 (minor resistance is at 135.30) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “The USD strength that started earlier this week ended quickly as the sharp pullback yesterday took out our ‘strong support’ level at 135.00 (low has been 134.25). The rapid pullback has scope to extend to 133.50. Overall, only a break of the ‘strong resistance’ level, currently at 136.00 would indicate that the pullback is not ready to extend lower.”