USD/JPY: bearish prospects lost momentum – UOB

FX Strategists at UOB Group noted the shift to a bearish phase in the pair seems to have lost traction for the time being.

Key Quotes

24-hour view: “Against our expectation for a retest of 105.20/25, USD rebounded strongly from a low of 105.34. The robust recovery appears to have scope to extend further but a sustained move above 106.70 seems unlikely (106.50 is already quite a strong resistance). Support is at 105.90 followed by 105.60. The 105.34 low is not expected to come into the picture, at least not for today”.

Next 1-3 weeks: “We highlighted yesterday (05 Mar, spot at 105.50) that despite the break of the strong 105.50 support (low of 105.23 last Friday), we were not convinced that the price action is the start of a bearish phase. We held the view that only a NY closing below 105.20 would indicate that a sustained move towards 104.50, 104.00 has started. All that said, the subsequent strong and swift recovery during NY hours came as a surprise as USD hit an overnight high of 106.23. From here, the prospect for a shift to a bearish phase has diminished considerably but remains intact unless USD can reclaim the strong 106.70 resistance. A break of 106.70 would suggest that last Friday’s 105.23 low is a short-term bottom and USD could recover further towards 107.50”.