USD/JPY: A sustained decline looks likely below 148.90 – UOB

24-hour view: We indicated last Friday that “as long as USD stays below 151.30, it could weaken but is unlikely to break clearly below 150.10.” The anticipated USD weakness exceeded our expectations as USD broke below 150.10 and plummeted to a low of 149.12. USD rebounded from the low, and this combined with oversold conditions suggests USD is unlikely to weaken further. Today, USD is more likely to trade in a range, probably between 149.40 and 150.60. 

Next 1-3 weeks: After USD pulled back early last week, we highlighted last Wednesday (15 Nov, spot at 150.55) that “the recent buildup in upward pressure has faded”, and we expected USD to trade in a range of 149.50/151.65. On Friday, USD broke below 149.50 before rebounding quickly from a low of 149.18. The increase in downward momentum is not enough to suggest that USD is ready to head lower in a sustained manner. USD must break clearly below the major support near 148.90 before a sustained decline is likely. As long as USD does not break above 151.10 in the next few days, the likelihood of a clear break below 148.90 will remain in place.