USD/JPY: Positive phase could end below 108.50 – UOB

A breach of the 108.50 level could be indicative that the positive phase in USD/JPY is over, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for USD to ‘edge upwards’ was incorrect as it dropped to 108.76 before rebounding. The current movement is viewed as part of a consolidation phase and USD is likely to trade between 108.85 and 109.30 for today.”

Next 1-3 weeks: “We have held a positive view in USD for more than 2 weeks now. After USD rose to a fresh 9-month high of 109.36, we highlighted on Monday (15 Mar, spot at 109.00), that ‘upward momentum has not improved by much’. We added, ‘USD has to close above 109.25 before a sustained rise to 109.85 can be expected’. While there is no change in our view, USD could not afford to dither at these overbought levels or the risk of a pullback would increase quickly. In other words, USD has to start ‘marching’ higher within these few days or a break of 108.50 (no change in ‘strong support’ level) would indicate that the current positive phase has come to an end.”