USD/JPY could target 106.60 if 107.00 is breached – UOB

A break below the 107.00 handle should motivate USD/JPY to extend the drop to the 106.60 region, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that USD is “deep in oversold territory and the next support at 107.00 is unlikely to come under serious threat”. We added, USD is “more likely to consolidate its loss and trade sideways between 107.00 and 107.65”. The subsequent price action was close to our narrative as USD rebounded from 107.04 to 107.73 before dropping back to end the day little changed at 107.30. Indicators are still unwinding from oversold conditions and USD could continue to trade sideways for now, likely not moving much out of last Friday’s 107.04/107.73 range”.

Next 1-3 weeks: “USD tried but failed to break the 107.00 level that was first highlighted last Thursday (20 Jun, spot at 107.70). The price action was not exactly surprising as deeply oversold shorter-term conditions suggest USD could consolidate and trade sideways for 1 to 2 days. As long as the ‘key resistance’ at 108.00 is intact (no change in level from last Friday), the current ‘negative phase’ that started 3 weeks ago (03 Jun, spot at 108.30) appears to have legs to extend lower. From here, a break of 107.00 would indicate that USD is ready to tackle the next support at 106.60”.