USD/JPY still faces upside risks in the near term – UOB

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, USD/JPY is expected to remain bid while above the 134.00 level in the short term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘despite the strong advance, there has been no significant increase in upward momentum and USD is unlikely to strengthen much further’. We expected USD to consolidate between 134.20 and 135.20. Our view of consolidation was not wrong even though USD traded within a narrower range than expected (134.35/135.06). Upward momentum has firmed somewhat and USD is likely to edge higher today. However, any advance is unlikely to break the major resistance at 135.50. Support is at 134.60, a breach of 134.35 would indicate that the build-up in momentum has faded.”

Next 1-3 weeks: “On Monday (20 Feb, spot at 134.35) we highlighted that USD could consolidate for a couple of days before heading higher to the next target at 135.50. It has been a couple of days but there is no sign that USD is ready to head higher to 135.50. However, upward momentum appears to be firm and the risk is still to the upside. Only a break of 134.00 (‘strong support’ level was at 133.60 yesterday) would indicate that the USD strength that started in the middle of last week has come to an end. Looking ahead, if the USD breaks decisively above 135.50, the next level to watch is 137.00.”