USD/JPY still neutral, room for a test of 111.70 – UOB

FX Strategists at UOB Group stay neutral on the pair, hinting at the chance of a test of the 111.70 area in the near term.

Key Quotes

“The abrupt turnaround was unexpected as USD soared to hit a high of 110.97. The strong rally from an initial low of 109.25 appears to be running ahead of itself and further strong up-move is not expected. That said, a test of 111.30/35 is not ruled out but the major 111.70 resistance is unlikely to come into the picture”.

“We indicated yesterday that “we are not convinced that the current movement is the start of a bearish phase”. However, the ability of USD to make such strong gains was unexpected. The immediate pressure has shifted to the upside and the risk is for further USD strength towards 111.70, the month-to-date high. A clear break above this level would be a good indication that USD has moved into a bullish phase. In the meanwhile, there is no reason to expect a lower USD in the coming days. As long as the key short-term support at 110.20 is not taken out, the current upward pressure would continue to increase”.