USD/JPY is still focused on 107.00 – UOB

FX Strategists at UOB Group noted that USD/JPY needs to surpass 107.00 to allow for the continuation of the positive momentum.

Key Quotes

24-hour view: “We highlighted yesterday that ‘USD could edge lower by any weakness is viewed as part of a lower trading range of 105.80/106.30’. We added, ‘a sustained decline below 105.80 is not expected’. However, USD plummeted to 105.59 before snapping back up and ended the day on a firm note at 106.55 (+0.54%). Upward momentum has improved, albeit not by much. From here, USD could edge higher but the chance for a clear break of the solid resistance at 107.00 is not high (next resistance is at 107.30). On the downside, a break of 106.25 would indicate the current mild upward pressure has eased.”

Next 1-3 weeks: “On Tuesday (26 Aug, spot at 106.45), we noted that ‘upward momentum is beginning to improve but further USD strength is likely only if USD closes above 107.00’. We added, ‘the prospect for such a scenario is not high but it would increase as long as USD does not move below 105.60 within these few days’. While USD dipped one pip below 105.60 yesterday (low of 105.59), it rebounded strongly and quickly. Despite the ‘breach’ of the 105.60 ‘strong support’, the momentum outlook still appears to be positive. That said, 107.00 is a formidable resistance and USD has to close above this level before further sustained advance can be expected. Support is at 106.00 ahead of the still rather strong level at 105.60.”