In opinion of FX Strategists at UOB Group, the outlook for USD/JPY remains tilted to further upside in the near-term.
Key Quotes
24-hour view: “We expected USD to ‘advance further’ yesterday but we were of the view that ‘overbought conditions could ‘limit’ any gains to a test of 109.60’. We highlighted that ‘a move to the next major resistance at 109.95 would come as a surprise’. While our view was not wrong as USD rose to 109.69, we did not anticipate the subsequent sharp sell-off (USD plummeted to 108.88 during NY hours). The rapid decline appears to running ahead of itself and USD is unlikely to weaken much further. From here, USD is more likely trade sideways between 108.80 and 109.40.”
Next 1-3 weeks: “Yesterday (03 May, spot at 109.30), we indicated that ‘the upward bias in USD is still intact’. We added, ‘the next resistance is at 109.60 followed by a major level at 109.95’. USD subsequently advanced to 109.69 before staging a surprisingly sharp pullback. While upward momentum has waned, only a break of 108.55 (no change in ‘strong support’ level) would indicate that the positive phase has ended. Until then, there is scope for the current USD strength to extend to 109.95 even though the prospect for such a move is not high.”