USD/JPY could now attempt to visit the 128.60 in the short-term horizon, commented FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Our expectations for USD to ‘trade within a range’ yesterday were incorrect as it soared to 127.81 before extending its gains during early Asian hours. Solid upward momentum suggests USD could rise above 128.30. The next resistance at 128.60 is likely out of reach for now. On the downside, 127.40 is expected to be strong enough to hold any intraday pullback (minor support is at 127.70).”

Next 1-3 weeks: “Yesterday (30 May, spot at 127.15), we highlighted that ‘downward momentum has waned considerably and the chance for USD to decline to 126.00 has diminished’. That said, we did not quite expect the subsequent strong surge that cracked our ‘strong resistance’ level at 127.60. The breach of the ‘strong resistance’ level indicates that the weak phase in USD that started more than 2 weeks ago (see annotations in the chart below) has run its course. The current rebound has room to extend to 128.60. Only a break of the ‘strong support’ at 127.20 would indicate that USD is not ready to advance from here.”