USD/JPY: a test of 110.00 looks unlikely – UOB

FX Strategists at UOB Group believe that a move to the key 110.00-area in USD/JPY looks unlikely, at least in the very near-term.

• "24-hour view: We highlighted yesterday ‘USD could test the strong 109.75 resistance’ but held the view ‘a sustained rise above this level appears unlikely’. While USD came close to 109.75, the sharp sell-off from 109.72 was clearly not anticipated. The rapid drop is deep in oversold territory, but it is too early to expect a recovery. From here, USD could edge lower but any weakness is viewed as lower trading range of 108.75/109.25 (a sustained decline below 108.75 is not expected).
• Next 1-3 weeks: The failure to break the major 109.75 resistance (high of 109.72 yesterday) coupled with the sharp sell-off from the high suggests that USD is not ready to trade above 110.00 just yet (we previously held the view ‘a break of 109.75 would greatly increase the odds for USD to move above 110.00’). From here, USD is deemed to have moved into a sideway-trading phase even though the weakened underlying tone suggests it would likely test the bottom of the expected 108.50/109.55 sideway-trading range first.”