USD/JPY: Rally now targets the 121.50 level – UOB

The strong upside momentum could push USD/JPY to the 121.50 region in the next weeks, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We indicated yesterday that ‘the rapid improvement in upward momentum is likely to lead to further USD strength’. We added, ‘the next resistance is at 120.40’. While our view for a stronger USD was correct, we did not expect the outsized rally as USD rocketed to 121.03 before extending its gains after the end of NY session. Further USD strength is not ruled out but in view of the deeply overbought conditions, a sustained rise above the major resistance at 121.50 is unlikely. On the downside, a breach of 120.30 (minor support is at 120.55) would indicate that the current USD rally is ready for a breather.”

Next 1-3 weeks: “We turned positive in USD about two weeks ago. As USD rallied past our objectives, in our latest narrative from yesterday (22 Mar, spot at 120.00), we held the view that USD could continue to rise, albeit at a slower pace. However, USD blew past the 120.40 resistance and rocketed above 121.03. While it is left to be seen if USD can maintain the current frenetic pace of advance, the risk is clearly for further USD strength. The next resistance level of note is at 121.50 followed by 122.00. Only a breach of 119.60 (‘strong support’ level was at 118.90 yesterday) would indicate that the current strong upward pressure has eased.”