USD/JPY: Further strength remains in the pipeline – UOB

In light of the recent price action, USD/JPY now faces the next hurdle at the 118.00 level, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘steadily improving momentum is likely to lead to further USD strength to 116.50, possibly 116.70’. While our view for a higher USD turned out to be correct, we did not anticipate the manner by which it rocketed to 117.35. Upward momentum remains strong as USD extended its decline upon opening today. Further advance appears likely even though overbought conditions suggest that 118.00 is likely out of reach for now (there is a minor resistance at 117.80). Support is at 117.20 followed by 116.90.”

Next 1-3 weeks: “We detected the build-up in momentum last Thursday and as USD rose, we highlighted on Friday (11 Mar, spot at 116.30) that ‘USD could advance further’. We noted that resistance levels are at 116.70 followed by 117.00. While our view was not wrong, we did not anticipate the manner by which USD rocketed to a high of 117.35 before closing higher by a whopping 0.99% (closed at 117.28), its biggest 1-day gain since Nov 2020. Impulsive upward momentum suggests further USD strength. The next resistance level of note is at 118.00 followed by the 2017 high near 118.65. On the downside, a breach of 116.40 (‘strong support’ level was at 115.60 last Friday) would indicate that the current strong upward pressure has eased.”