USD/JPY bullish, still targeting 111.65

The pair’s stance remains bullish in the near term, allowing at the same time for a test of the 111.60 region, argued FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we highlighted last Friday that the drop to 109.50/55 “is running ahead of itself”, the strong surge higher that easily took out the rather strong 111.00/05 level was not expected. From here, a retest of the last Friday’s high near 111.30/35 would not be surprising but based on the current overbought conditions, the odds for a clear move beyond the next level at 111.65 are not high (next resistance is further up at 112.15/20). On the downside, only a move back below 110.50 would indicate that a temporary top is in place (minor support is at 110.80)”.

Next 1-3 weeks: “We highlighted last Friday that “the 111.00/05 level is acting as a very strong resistance now and would be a difficult hurdle to overcome”. USD however took out this level without much difficulty and as it surged to a high of 111.32. Despite the strong up-move, upward momentum is not as impulsive as preferred and the next resistance at 111.65 may not be not easy to crack (this level is followed by another strong resistance at 112.20). All said, only a move back below 110.00 (stop-loss adjusted higher from 109.50) would indicate that the bullish phase that started last Wednesday (13 Sep) has ended”.