USD/JPY is now expected to embark on a consolidative phase in the next weeks, likely within the 128.00-130.80 range, noted UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia
Key Quotes
24-hour view: “We highlighted last Friday that USD ‘appears to have moved into a consolidation phase and it is likely to trade between 129.10 and 130.55’. Our view for consolidation was not wrong even though USD traded within a narrower range than expected (129.45/130.27). We continue to expect USD to consolidate, likely within a range of 129.35/130.30.”
Next 1-3 weeks: “There is not much to add to our latest update from last Thursday (26 Jan, spot at 129.25). As highlighted, the current movement in USD is likely part of a consolidation phase and we expect USD to trade within a range of 128.00/130.80 for now.”
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The USD/JPY currency pair is seen navigating within a range-bound theme, according to a recent forecast by UOB analysts.
The U.S. Dollar has seen a decline this month, weighed down by the rising risk of corporate bankruptcies and rising coronavirus infections in the U.S., while the Japanese Yen has surged to a 2-month high as investors shifted their positions to the safe-haven currency amid increasing uncertainties in the market.
However, UOB has predicted that this pair will remain within a range-bound theme in the near-term; with resistance seen around the 107.6 level and support at the 106.6 level.
UOB noted that the USD/JPY has been somewhat resilient due to strong Japanese economic fundamentals and the fact that the Bank of Japan has kept its monetary policy unchanged. UOB analysts expect the Bank of Japan to keep its monetary policy unchanged at least until the end of 2021, which should help keep the USD/JPY steady as well.
UOB also noted that the USD/JPY could break out of its range if news of potential developments in the global economy were to drive investors out of the safe-haven currency into riskier assets. Any progress regarding progress on the U.S. stimulus package could boost risk appetite, which has the potential to drive the USD/JPY higher.
Overall, UOB expects the USD/JPY to remain within its current range-bound theme supported by strong Japanese economic fundamentals. Investors should monitor any news regarding U.S. stimulus package and geopolitical developments for potential opportunities in this currency pair.
