The upside momentum in USD/JPY remains well in place and could push the pair to the area well above the 106.00 level in the next weeks.
Key Quotes
24-hour view: “Yesterday, we held the view that ‘the rapid rise appears to be overdone and while further USD strength is not ruled out, a sustained rise beyond 106.35 is unlikely’. The subsequent advance fell short of our expectation as USD retreated from 106.21. The combination of overbought conditions and waning momentum indicates that USD is unlikely to strengthen today. USD could edge lower but any weakness is viewed as part of 105.50/106.00 range. In other words, a sustained decline below 105.50 is not expected.”
Next 1-3 weeks: “Yesterday (16 Feb, spot at 105.40), we highlighted that ‘shorter-term momentum has improved considerably and a break of 105.60 would not be surprising’. We added, ‘if USD breaks the month-to-date high of 105.76, it would shift the focus to 106.00’. While our shift to a positive stance was timely, we did not quite anticipate the rapid manner by which USD surged to 106.06. Upward momentum has improved further and USD could extend its gains to 106.35, possibly as high as 106.70. The current positive outlook for USD is deemed intact as long as it does not move below 105.00 (‘strong support’ level was 104.80 yesterday).”
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