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USD/JPY remains firm and could extend the upside to the 106.00 area in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for USD to ‘trade sideways’ was wrong as it lifted off and surged to 105.56. While the rally is clearly overbought, it is too early to expect a pullback. There is room for USD extend its gains but the major resistance at 106.00 is unlikely to come into the picture for now (105.80 is already quite a strong level). Support is at 105.30 followed by 105.10.”

Next 1-3 weeks: “We have expected USD to strengthen since last week. Our latest narrative was from Tuesday (02 Feb, spot at 104.85) where we highlighted that ‘upward momentum has improved slightly and while the outlook for USD is still positive, the major resistance at 105.40 may not come into the picture so soon’. In that sense, we did not quite expect the sudden surge in USD yesterday (04 Feb) that sent it soaring to 105.56. Further USD strength appears likely and the next level to focus on is at 106.00. The positive outlook is deemed intact as long as USD does not move below 104.80 (‘strong support’ level previously at 104.50).”