USD/JPY could extend the upside to the 106.70 region – UOB

The upside bias in USD/JPY remains well in place and could push the pair to another test of the 106.70 region in the next weeks, suggested UOB Group’s FX Strategists.

Key Quotes

24-hour view: “While we expected USD to ‘advance further’ yesterday, we were of the view ‘the month-to-date high of 105.76 could be just out of reach’. The subsequent strength exceeded our expectation as USD blew past 105.76 and soared to 106.06 (before extending its gains after NY close). The rapid rise appears to be overdone and while further USD strength is not ruled out, a sustained rise beyond 106.35 is unlikely (next resistance is at 106.70). Support is at 105.85 followed by 105.65.”

Next 1-3 weeks: “Yesterday (16 Feb, spot at 105.40), we highlighted that ‘shorter-term momentum has improved considerably and a break of 105.60 would not be surprising’. We added, ‘if USD breaks the month-to-date high of 105.76, it would shift the focus to 106.00’. While our shift to a positive stance was timely, we did not quite anticipate the rapid manner by which USD surged to 106.06. Upward momentum has improved further and USD could extend its gains to 106.35, possibly as high as 106.70. The current positive outlook for USD is deemed intact as long as it does not move below 105.00 (‘strong support’ level was 104.80 yesterday).”