USD/JPY to retest 156.70 before pulling back - UOB Group

Chance for US Dollar (USD) to retest 156.70 before a more sustained pullback is likely. In the longer run, USD weakness has stabilized; it is likely to consolidate between 155.30 and 157.55 for the time being, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD weakness has stabilized

24-HOUR VIEW: "Two days ago, USD dropped to 154.73 and then rebounded. Yesterday, we pointed out, 'slowing downward momentum suggests the downward pressure is easing,' and we expected USD to 'trade in a range between 155.00 and 156.00.' Instead of trading in a range, USD rebounded strongly, reaching a high of 156.70. Despite the advance, there is no significant increase in upward momentum. That said, there is a chance for USD to retest 156.70 level before a more sustained pullback is likely. The major resistance at 157.55 is unlikely to come under threat. Support is at 156.00; a breach of 155.60 would indicate that the current upward pressure has faded."

1-3 WEEKS VIEW: "We turned negative in USD a week ago. Tracking the decline, we indicated yesterday (21 Jan, spot at 155.55) that 'despite no pickup in downward momentum, there is a chance for USD to drop further to 154.40.' We did not expect USD to rebound strongly to 156.70. The breach of our 'strong resistance' at 156.50 indicates that the weakness in USD has stabilized. For the time being, USD is likely to consolidate in a range between 155.30 and 157.55."