Extra gains in USD/JPY are likely once 111.00 is cleared, noted FX Strategists at UOB Group.
24-hour view: “We expected USD to strengthen yesterday but we were of the view that ‘any advance is likely limited to a test of 110.55’ and ‘the major resistance at 110.80 is not expected to come into the picture’. The subsequent USD strength exceeded our expectation as it came close to breaking 110.80 (high of 110.79). Upward momentum has improved and USD could test 111.00. In view of the overbought conditions, USD may not be able to maintain a foothold above this level. Support is at 110.40 followed by 110.25.”
Next 1-3 weeks: “On Monday (21 Jun, spot at 110.20), we held the view that USD has moved into a consolidation phase and we expected USD to trade within a 109.60/110.80 range. We did not anticipate the rapid manner by which USD approaches the top of the expected range (overnight high of 110.79). Upward momentum has improved but not by all that much. From here, USD has to close above the major resistance at 111.00 before a sustained advance can be expected. The prospect for such a move appears to be high as long as USD stays above 110.05 within these few days. Looking ahead, the next resistance above 111.00 is at 111.35.”
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