In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, further decline could force USD/JPY to revisit the 139.00 zone.

Key Quotes

24-hour view: We indicated yesterday that the USD weakness had not stabilized. We expected USD to weaken, but we were of the view that “the next major support at 140.05 is unlikely to come under threat.” While our view was not wrong, as USD fell to a low of 140.21, it broke below 140.05 in early Asian trade today. The risk for today is still clearly on the downside. That said, it remains to be seen if there is enough momentum to carry USD to the next major support at 139.00. On the upside, if USD breaks above 140.90 (minor resistance is at 140.40), it would suggest that USD is not weakening further.

Next 1-3 weeks: Two days ago (10 Jul), when USD was trading at 142.50, we turned negative in USD. While our view was not wrong, the pace of the decline has exceeded our expectations. Note that it was only yesterday (11 Jul, spot at 141.30) that we stated that USD could weaken further, and the next level to watch is 140.05. Today, in early Asian trade, USD fell below 140.05. Instead of slowing, the sharp and swift decline over the past few days is accelerating. Looking ahead, the next level to aim for is 139.00, followed by 138.45. All in all, we will continue to expect a lower USD as long as it stays below 141.40 (‘strong resistance’ level was at a much higher level of 143.00 yesterday).