USD/JPY dwindling odds for further upside – UOB

FX Strategists at UOB Group believe further upside in spot appears now unlikely.

Key Quotes

24-hour view: “We expected USD to “grind higher towards the major 114.50 resistance ”yesterday. However, USD rallied strongly to take out the resistance and hit a high of 114.72. The subsequent sharp and rapid drop from the high came as a surprise. While the decline appears to be running ahead of itself, further weakness seems likely even though 113.30 is a rather strong support and is unlikely to yield so easily (minor support at 113.55). Resistance is at 114.05 followed by 114.35. The 114.72 high is not expected to come into the picture for now”.

“While USD took out the major 114.50 resistance yesterday, the subsequent sharp and rapid ‘u-turn’ from a high of 114.72 was a surprise. We have highlighted that only a NY closing above 114.50 would indicate the start of a bullish phase in USD. This scenario is not ruled out just yet but the prospect for a sustained up-move has diminished considerably. To put it another way, unless USD can close above 114.50 in NY today, the risk would shift quickly towards the downside (for a probe lower towards the 112.50 support)”.