In opinion of FX Strategists at UOB Group, the rally in USD/JPY could advance further and test the vicinity of 110.70 in the short-term horizon.
24-hour view: “USD continued to surprise on the upside. Our expectations of a limited advance to 109.80 were proven too conservative as USD broke above the key 110 handle earlier this morning. While the move is severely outstretched and overbought, USD appears to have the vigor for a last burst towards 110.45 before any corrective move can begin. On the downside, look for support at 109.60 and only a breach of 109.20 would suggest a short-term top is in place.”
Next 1-3 weeks: “The relative ease of how USD took out its key resistance at 109.75 means that USD bulls remain fully in charge. While our oscillators are showing the most overbought conditions in over a year, it appears that there is still scope for a further rally to test May 2019’s highs at 110.67 before a corrective phase can begin. On the downside, expect support at 109.60 and only a move below 108.90 would indicate a short-term top has been put in place.”
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