USD/JPY still looks to 109.85 near-term – UOB

UOB Group’s FX Strategists noted USD/JPY could still attempt a move to the 109.85 level in the next weeks.

Key Quotes

24-hour view: “We expected USD to trade ‘within a 108.35/108.95 range’ last Friday. However, it rose to 109.16 before closing on a firm note at 109.00 (+0.47%). 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. Support is at 108.75 followed by 108.50.”

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’. While USD rose to 109.16 on Friday (12 Mar), upward momentum has not improved by much. 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 108.20 (‘strong support’ level was previously at 108.00).”