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The constructive view in USD/JPY remains well and sound in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to strengthen last Friday but we were of the view that ‘odds for a sustained advance above 104.75 are not high’. We highlighted that ‘105.00 is unlikely to come into the picture’. Our view was not wrong as USD rose to 104.94 before easing off to close at 104.68 (+0.45%). Overbought conditions suggest that further USD strength is unlikely. For today, USD is more likely to consolidate and trade between 104.40 and 105.00.”

Next 1-3 weeks: “Last Thursday (28 Jan, spot at 104.25), we highlighted that ‘risk for USD has shifted to the upside’ and we were of the view that ‘the solid resistance at 104.75 may not yield so easily’. However, USD popped to a high of 104.94 on Friday before easing off to close on a firm note at 104.68. Upward momentum has improved and USD is likely to strengthen further. That said, overbought shorter-term conditions could lead to a couple of days of consolidation first. Looking ahead, a clear break of 105.00 would shift the focus to 105.40. Overall, the current positive outlook for USD is deemed intact as long as USD does not move below 104.00 (‘strong support’ level previously at 103.75).”