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FX Strategists at UOB Group noted that extra gains are likely in USD/JPY on a break above the 112.40 level.

Key Quotes

24-hour view: “The sudden and sharp retreat in USD came as a surprise as it dropped to a low of 111.46 last Friday (before extending its decline upon opening this morning). Upward momentum has eased and USD is likely taking a breather after its frenetic rally last week. In other words, USD is likely to trade sideways for today, expected to be between 111.20 and 112.00.”

Next 1-3 weeks: “While we indicated yesterday (20 Feb, spot at 111.25) that the “abrupt and powerful rally in USD could extend to 112.00”, the speeded up price action wherein USD rocketed to a high of 112.21 was not exactly expected (USD gained a whopping +2.05% over the past two days, the largest 2-day gain since Sep 2017). From here, all eyes are on the solid mid-term resistance at 112.40. A break of this critical level could spur further USD gains towards 113.30 in the coming days. Only a move below 111.20 (‘strong support’ level was at 110.30 yesterday) would indicate that the current rally has run out of gas.”