USD/JPY remains weak and could extend the decline to the 137.15 level in the next few weeks, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: We expected USD to weaken yesterday. However, we indicated, “it remains to be seen if there is enough momentum to carry USD to the next major support at 139.00.” We did not expect USD to continue to accelerate lower as it plunged to 138.15. The outsized decline is severely oversold, but we are not ruling out further weakness. However, a clear break of 137.15 will come as a surprise today. There is another support at 138.00. Resistance is at 139.20, followed by 139.70.

Next 1-3 weeks: Yesterday (12 Jul, spot at 139.95), we highlighted that “the sharp and swift decline in USD is accelerating.” We added, “the next level to aim for is 139.00, followed by 138.45. While our view of downward acceleration turned out to be correct, we did not quite expect USD to break below both levels so quickly (low has been 138.15 in NY trade). The USD weakness that started on Monday is severely extended. Note that USD has lost a whopping 4.3% in the last five days. That said, we are not ruling out further USD weakness as long as the ‘strong resistance’ at 140.50 (level was at 141.40 yesterday) is not breached. On the downside, the next level to watch is 137.15.