FX Strategists at UOB Group stays constructive on USD/JPY and forecast extra gains on a move above the 122.40 region in the near-term.
24-hour view: “USD surged past 112.00 and hit 112.21 before closing at its highest level since April last year (NY close of 112.11). After the supersized surge over the past couple of days, it is too early to expect a pull-back. From here, USD could move above the 112.21 but there is a solid resistance at 112.40 and this level may not yield so easily. That said, a breach of this major level could lead further rapid rise as the next resistance of note is at 113.00. On the downside, 111.40 is expected to be strong enough to hold any intraday weakness (111.70 is already quite a strong support).”
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.”