USD/JPY: Further upside could reach the vicinity of 112.00 – UOB

Further upside traction could push USD/JPY to the 112.00 neighbourhood in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to strengthen yesterday but we were of the view that ‘a sustained advance above 111.25 is unlikely’. The strong surge that sent USD to 111.63 came as a surprise. Upward momentum is strong and further USD strength is likely. That said, deeply overbought conditions suggest that 111.95 could be just out of reach. Support is at 111.40 followed by 111.25.”

Next 1-3 weeks: “While we turned positive on USD yesterday (01 Jul, spot at 111.05), we noted that upward momentum has not improved by all that much and we expected USD to ‘trade with an upward bias towards 111.45’. We did not anticipate the sudden lift-off that sent USD soaring to 111.63. The strong boost in momentum suggests that further USD strength is likely. However, overbought shorter-term conditions could slow the pace of any further advance. The level to focus on from here is at 111.95. A break of 111.95 would open up the way for a move to last year’s high near 112.20. The current USD strength is deemed intact as long as it does not move below 111.00 (‘strong support’ level was at 110.55 yesterday).”