USD/JPY has regained upside momentum and now faces a tough resistance at 109.75, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “The strong support highlighted at 107.50 yesterday was not threatened as USD dropped to 107.63 before rocketing to an overnight high of 109.24. The rapid and outsized surge appears to be running ahead of itself and further sustained USD strength appears unlikely. That said, there is scope for USD to test 109.35 first before the current upward pressure should ease. The major 109.75 level is not expected to come into the picture. Support is at 108.80 and a breach of 108.55 would suggest a short-term top is in place.”
Next 1-3 weeks: “While we held the view that the weakness in USD that started earlier this year is running ahead of itself and noted that the ‘prospect for a break of the mid- to long-term support at 107.00 is not high’, the manner by which USD rocketed after touching 107.63 yesterday (08 Jan) came as a surprise (note that the 161 pips range between 107.63 and 109.24 yesterday is the largest 1-day range in 4-1/2 months). The strong daily closing in NY (109.12, +0.64%) has shifted the near-term risk to the upside but the long-term 109.75 level is expected to continue to offer solid resistance (USD tried but failed to break this long-term resistance level a few times last month). All in, USD is expected to gravitate towards 109.75 and only a move back below 108.20 would suggest USD is not ready to tackle 109.75 just yet.”
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