USD/JPY: Further gains expected above 108.50 – UOB

Extra upside is likely in USD/JPY as long as it keeps business above the 108.50 level for the time being, noted FX Strategists at UOB Group.

Key Quotes
24-hour view: “We expected USD to ‘trade between 108.85 and 109.30’ yesterday. USD rose to 109.32 before plummeting to an overnight low of 108.73. The sharp and rapid decline appears to be overdone and USD is unlikely to weaken further. USD is more likely to consolidate and trade within 108.80/109.30 range.”

Next 1-3 weeks: “We have held a positive view in USD for more than 2 weeks now. After USD rose to a fresh 9-month high of 109.36, we highlighted on Monday (15 Mar, spot at 109.00), that ‘upward momentum has not improved by much’. We added, ‘USD has to close above 109.25 before a sustained rise to 109.85 can be expected’. While there is no change in our view, USD could not afford to dither at these overbought levels or the risk of a pullback would increase quickly. In other words, USD has to start ‘marching’ higher within these few days or a break of 108.50 (no change in ‘strong support’ level) would indicate that the current positive phase has come to an end.”