USD/JPY: Next on the upside comes 130.50 – UOB

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, the next hurdle for USD/JPY emerges at 130.50 in the short term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘upward momentum is still strong and USD could extend its advance to 129.30’. While our view for a higher USD was correct, we did not expect the manner by which it lifted off and surged to a high of 130.18. Further USD strength is not ruled out but in view of the deeply overbought conditions, the pace of advance is likely to be slower and a clear break of the next major resistance at 130.50 is unlikely. On the downside, a break of 129.50 (minor support is at 129.80) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “While we turned positive in USD on Monday (31 May, spot at 128.00). Yesterday (01 Jun, spot at 128.80), we highlighted that further USD strength would not be surprising and we indicated that resistance is at 129.30 followed by 129.80. We did anticipate the sharp rally as USD surged to a high of 130.18. While USD could continue to strengthen, overbought conditions suggest a slower pace of advance. The next resistance is at 130.50 followed by 130.80. Overall, only a break of 129.00 (‘strong support’ level was at 128.00 yesterday) would indicate that the rapid build-up in momentum has fizzled out.”