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The constructive bias in USD/JPY is expected to persist for the time being, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘while upward momentum has improved a tad, conditions remain overbought and any advance in USD is likely limited to a test 105.15’. Our view was not wrong as USD rose to 105.17 before easing off to close little changed at 104.97 (+0.06%). Momentum is beginning to wane and this coupled with still overbought conditions has increased the risk of a pullback. That said, any weakness is likely limited to a test of 104.70. Resistance is at 105.15 followed by the rather strong level at 105.40.”

Next 1-3 weeks: “We highlighted yesterday (01 Feb, spot at 104.70) that the ‘positive outlook in USD is intact’ and ‘a break of 105.00 would shift focus to 105.40’. USD subsequently edged a few pips above 105.00 (high of 105.03) before settling at 104.91 (+0.22%). Upward momentum has improved, albeit not by much. The overall positive outlook is still intact but the 105.40 level may not come into the picture so soon. The positive outlook is deemed intact as long as USD does not move below 104.25 (‘strong support’ level previously at 104.00 yesterday).”