USD/JPY expected to remain sidelined – UOB

FX Strategists at UOB Group note that USD/JPY is now seen within a consolidative fashion.

• "24-hour view: We highlighted yesterday “the underlying tone has weakened and the risk is on the downside”. We added, “USD could move and test the strong 108.65 support”. USD subsequently dropped to 108.64 before recovering slightly. Downward momentum has picked up, albeit not by much. From here, the bias for USD is still to the downside. That said, any weakness is expected to encounter strong support at 108.45. Resistance is at 109.00 but stronger level is at 109.15.
• Next 1-3 weeks: We cautioned on the deteriorating upward momentum yesterday (13 Nov, spot at 109.00) and held the view that “risk of a short-term top has increased”. USD subsequently dipped one pip below our ‘strong support’ level 108.65 (low of 108.64). The price action suggests last week’s 109.48 high is a short-term top (we previously held the view that a break of the solid 109.75 resistance is ‘not ruled out’). The current movement is viewed as the early stages of a consolidation phase. In other words, USD is expected to trade sideways between 108.45 and 109.30 for a period."