There is room for US Dollar (USD) to rise further against Japanese Yen (JPY), but a sustained break above 149.30 is unlikely. In the longer run, conditions remain overbought, but strong momentum may continue to carry USD higher; the next level to monitor is 149.80, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Strong momentum may continue to carry USD higher
24-HOUR VIEW: “While we indicated yesterday that ‘further USD strength is not ruled out,’ we highlighted that ‘apparent negative divergence suggests any advance is unlikely to break above the major resistance at 148.05.’ We did not expect the surge in momentum that overwhelmed the overbought conditions, as USD soared to a high of 149.01. Conditions are deeply overbought, and today, while there is room for USD to rise further, a sustained break above 149.30 is unlikely. The major resistance at 149.80 is also unlikely to come into view. On the downside, if USD breaches 148.30 (minor support is at 148.50), it would mean that upward momentum is fading.”
1-3 WEEKS VIEW: “We turned positive on USD early last week (see annotations in the chart below). In our most recent narrative from two days ago, we indicated that “while we maintain our positive view, overbought conditions suggest a slower pace of advance, and the next major resistance at 148.05 (near last month’s high) may not come into the picture so soon.” However, USD reached 148.05 sooner than expected as it soared to a high of 149.01 in the NY trade yesterday. Although conditions remain overbought, strong momentum may continue to carry USD higher. The next level to monitor is 149.80. To sustain the overbought momentum, USD must hold above 147.65 (‘strong resistance’ level was at 146.70 yesterday).”
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