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UOB Group’s FX Strategists now see USD/JPY accelerating the upside above the 110.35 level in the short term.

Key Quotes

24-hour view: “We expected USD to strengthen yesterday but we were of the view that ‘a sustained rise above 109.95 is unlikely’. The subsequent USD strength exceeded our expectation as USD rose to 110.09 before closing on a firm note at 110.06 (+0.37%). Upward momentum remains strong and USD is expected to advance further even though overbought conditions suggest that it is unlikely to challenge the major resistance at 110.35. Support is at 109.85 followed by 109.65.”

Next 1-3 weeks: “We highlighted yesterday that ‘momentum indicators have turned neutral and USD is likely to trade between 109.10 and 110.15 for now’. We did not anticipate the subsequent strong rise in USD and the firm closing at 110.06 (+0.37%). While improved shorter-term momentum indicates that the risk is beginning to shift to the upside, USD has to close above the major resistance at 110.35 before a sustained advance can be expected. The next resistance is at 110.60 followed by 110.95. Support is at 109.65 but only a breach of 109.40 (‘strong support’ level) would indicate that the upside risk has dissipated.”