USD/JPY faces extra gains on a close above 109.25 – UOB

USD/JPY could advance to the 109.85 level once 109.25 is cleared, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our view for USD yesterday was that ‘robust upward momentum suggests that USD could move above last week’s top near 109.25 but overbought conditions could ‘limit’ any advance to 109.50’. Our view was not wrong as USD rose to 109.36 before easing off. The underlying tone still appears positive and USD could edge upwards but a break of 109.50 is unlikely. Support is at 109.00 followed by 108.80.”

Next 1-3 weeks: “We have held a positive view in USD for more than 2 weeks now. In our latest narrative from last Wednesday (10 Mar, spot at 108.55), we highlighted that ‘the sharp pullback from 109.23 has diminished the odds for further USD strength’. We added, USD ‘has to push higher soon as a prolonged consolidation at these overbought levels would quickly increase the risk of a deeper pullback’. USD rose to 109.36 yesterday before easing off to close slightly higher at 109.12 (+0.11%). Upward momentum has not improved by much and USD has to close above 109.25 before a sustained rise to 109.85 can be expected. Meanwhile, the current positive phase is deemed intact as long as USD does not move below 108.50 (‘strong support’ level was previously at 108.20).”