USD/JPY is expected to gain extra upside traction once 107.80 is cleared, suggested FX Strategists at UOB Group.
24-hour view: “We expected USD to weaken yesterday but highlighted that ‘lackluster momentum suggests that any weakness is unlikely to move clearly below the 106.60 support’. USD did not threaten the 106.60 level as it rebounded from 106.76. Despite the relatively robust rebound, upward momentum has not improved by much. That said, there is room for USD to edge higher but for today, any advance is viewed as part of higher 106.90/107.55 range.”
Next 1-3 weeks: “After USD surged to 107.76 on Monday, we highlighted on Tuesday (12 Apr, spot at 107.45) that USD ‘has to clear 107.80 first before further sustained advance can be expected’. We added, ‘the prospect for such a scenario is quite high but in order to maintain the current build-up in momentum, USD should not move back below the ‘strong support’ level at 106.60 within these few days’. USD drifted lower over the past couple of days and is currently approaching the 106.60 level. While the price action has dented the build-up in momentum, only a breach of 106.60 would indicate the prospect for a break of 107.80 has dissipated. Meanwhile, in order to revive the flagging momentum, USD has to move and stay above 107.30 within these 1 to 2 days.”
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