USD/JPY: A sustained advance is likely above 143.20 – UOB

Steady gains look on the cards for USD/JPY once it clears the 143.20 level, suggest Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB.

Key Quotes

24-hour view: The strong rally in USD that sent it to a high of 142.67 came as a surprise. While severely overbought, the rally could extend to 143.20 before the risk of a pullback increases. On the downside, if USD breaks below 141.30 (minor support is at 141.80), it would suggest that the current strong upward pressure has eased.

Next 1-3 weeks: Yesterday (31 Jul, spot at 140.80), we highlighted that “the outlook for USD is mixed”, and we expected it to trade in a choppy manner between 138.50 and 141.95. We did not expect the strong surge as USD soared to a high of 142.67. Unsurprisingly, upward momentum has increased. Despite severely overbought short-term conditions, USD could continue to rise. However, it must break and stay above 143.20 before further sustained advance is likely. The upside risk is intact as long as USD stays above 140.50 in the next couple of days. Looking ahead, the next significant resistance above 143.20 is at 145.00.