The upside momentum in USD/JPY is seen meeting initial hurdle at the 110.25 level in the next weeks, noted FX Strategists at UOB Group.
24-hour view: “We highlighted last Friday that ‘the sharp and rapid rally appears to be overdone but there is scope for USD to test 110.25 first before easing’. USD subsequently popped to 110.19 before easing. Deeply overbought conditions suggest that USD is unlikely to strengthen further. For today, USD is more likely to consolidate and trade between 109.50 and 110.05.”
Next 1-3 weeks: “There is not much to add to our update from last Friday (28 May, spot at 109.90). As indicated, strong boost in momentum suggests further USD strength. Resistance is at 110.25 followed by 110.55. USD subsequently popped to 110.19 before pulling back. Overbought shorterterm conditions could lead to a couple of days of consolidation first. Only a break of 109.30 (‘strong support’ level was at 109.15 last Friday) would indicate that the upside risk has dissipated.”