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In light of the recent price action, USD/JPY could now head towards the 112.00 area, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our view that the ‘consolidation phase over the past several days appears to be close to an end’ was correct, we clearly did not anticipate the vertical take-off that sent USD rocketing to an overnight high of 111.58. The rally is severely over-extended and further sustained USD strength is unlikely for today. USD is more likely to consolidate at these lofty levels, expected to be between 110.90 and 111.65.”

Next 1-3 weeks: “While we expected USD to ‘trade sideways’ since last Tuesday (11 Feb, spot at 109.75), we held the view the top of the expected range at 110.30 is ‘more vulnerable’. That said, the abrupt and powerful rally in USD came as a surprise as it blew past 110.30 (and another solid resistance at 110.65) to hit a 9-1/2 -month high of 111.58. From here, the rally could extend towards 112.00 in the coming days (next resistance is at 112.40). On the downside, the ‘break-out’ level of 110.30 is acting as ‘strong support’ and this level is likely to stay intact, at least for the next several days, if not longer.”