USD/JPY: Extra gains likely on a close above 118.65 – UOB

USD/JPY could attempt a visit to the 119.10 level once 118.65 is cleared, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected USD to ‘advance further’ yesterday, we were of the view that ‘overbought conditions suggest that 118.00 is likely out of reach for now’. We underestimated the upward momentum as USD soared to 118.21 before extending its advance after NY close. Conditions remain deeply overbought and while further USD strength is not ruled out, the chance for a break of the major resistance at 118.65 is not high for today. On the downside, a breach of 117.75 would indicate that the strong rally is ready to take a breather.”

Next 1-3 weeks: “We have expected a higher USD since late last week. In our latest narrative from yesterday (14 Mar, spot at 117.50), we highlighted that impulsive momentum suggests further USD strength. We added, “the next resistance level of note is at 118.00 followed by 2017 high near 118.65”. Our view was not wrong as USD surged to 118.21 during NY session before extending its gain. Overall, the current USD strength could continue for a while more and only a break of 117.30 (‘strong support’ level was at 116.40 yesterday) would indicate that the current strong upward pressure has eased. Looking ahead, a clear break of 118.65 would shift the focus to 119.10.”