USD/JPY: Unlikely to threaten 156.70 - UOB Group

Sharp bounce in US Dollar (USD) has room to extend; overbought conditions indicate that any advance is unlikely to threaten 156.70. In the longer run, USD remains weak; if it breaks below 154.90, the next objective will be at 154.40, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD remains weak

24-HOUR VIEW: "After USD fell sharply last Thursday, we highlighted on Friday that 'while the sharp drop appears to be excessive, the weakness has not stabilized just yet.' However, we held the view that "any further decline is likely part of a lower range of 154.90/156.15." USD subsequently dipped to 154.96 before rebounding strongly, reaching a high of 156.37 in NY trade. The sharp bounce has room to extend, but given the overbought conditions, any advance is unlikely to threaten the strong resistance level at 156.70. On the downside, support levels are at 155.90 and 155.40."

1-3 WEEKS VIEW: "Last Friday (17 Jan), when USD was at 155.35, we indicated that USD 'remains weak.' We added, 'if it breaks below 154.90, the next objective will be at 154.40.' USD then dipped to 154.96 before rebounding strongly. Although downward momentum has eased somewhat with the rebound, only a breach of 157.60 (no change in 'strong resistance' from last Friday) would indicate that the weakness in USD that started last Thursday has stabilized. To look at it another way, there is still a chance for USD to break below 154.90."