USD/JPY faces the next hurdle at 112.20 – UOB

Following the recent sharp upside, USD/JPY faces the next resistance at 112.20 in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our view for USD to move higher yesterday was correct, we underestimated USD strength as it surged to 111.63 (we were expecting a limited test of 111.20). Conditions remain deeply overbought but there is room for USD to test the major resistance at 111.80 before easing (next resistance is at 112.20). Support is at 111.40, a breach 111.15 would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “We turned positive USD last Friday (24 Sep, spot at 110.30) but we did not anticipate the rapid pace of the subsequent advance. In our update from yesterday (Sep 28, spot at 110.95), we indicated that USD ‘could move above 111.20, it is left to be seen if it can extend its gains to the August’s high near 111.80’. USD subsequently soared to 111.63 before closing on a strong note at 111.50 (+0.45%). The major resistance at 111.80 appears to be within reach. The next resistance above 111.80 is at 112.20. Overall, only a break of 110.70 (‘strong support’ level was at 110.30 yesterday) would indicate that the rapid rally over the past few days is ready to take a breather.”