USD/JPY looks firmer and closer to 104.00 – UOB

FX Strategists at UOB Group see USD/JPY trading on a firm note with the likeliness of a test of 104.25 ahead of 104.60.

Key Quotes

24-hour view: “While we noted yesterday that ‘downward pressure has dissipated’, we were of the view that ‘it is too early to expect USD to move higher in a sustained manner’. The surge in USD that sent it soaring to 103.95 and the subsequent strong daily closing of +0.74% higher (largest 1-day gain in 2 months) came as a surprise. Upward momentum is strong and the risk is for USD to continue to move higher. That said, overbought conditions suggest that the odds for of a break of the major resistance at 104.20 are not high (minor resistance is at 104.00). Support is at 103.60 followed by 103.40.”

Next 1-3 weeks: “We highlighted yesterday (07 Jan, spot at 103.80) that ‘the outlook is mixed and USD could trade between 102.50 and 103.65 for a period of time’. The subsequent surge that sent USD to 103.95 came as a surprise. The rapid improvement in momentum indicates further USD strength from here. A break of the major resistance at 104.25 could potentially lead to further rapid rise in USD towards 104.60. Overall, USD is expected to trade on a firm footing as long as it holds above 103.00 (‘strong support’ level).”