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The recent price action in USD/JPY suggests a probable move to levels beyond the 107.00 yardstick, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the underlying tone has firmed somewhat and this could lead to USD edging higher towards 106.40’. We added, ‘for today, a sustained rise above this level is not expected (next resistance is at 106.60)’. The subsequent USD strength exceeded our expectation as it soared to an overnight high of 106.68. While the rapid advance appears to be running ahead of itself, there is no sign of weakness just yet. From here, barring a move below 106.15 (minor support is at 106.30), USD could extend its gain to 106.90 before a pull-back can be expected.”

Next 1-3 weeks: “We highlighted yesterday that ‘upward momentum is showing sign of improving but for now, the prospect for a clear break of 106.60 is not high’. However, the sudden surge in momentum came as a surprise as USD soared to a high of 106.68. The rapid improvement in momentum suggests USD is likely to trade with an upward bias. From here, USD could strengthen towards 107.15. The next resistance at 107.50 is likely out of reach for now. Overall, only a breach of 105.85 (‘strong support’ level) would indicate the current upward pressure has dissipated.”