FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang now see dwindling chances for USD/JPY to challenge the 147.65 level in the near term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the outsize rally could extend to 144.00’. We added, ‘the next major resistance at 145.00 is unlikely to come into the picture for now’. The anticipated advance exceeded our expectations as USD came close to breaking 145.00 (high has been 144.98). Despite the pullback from the high, upward momentum remains strong and USD could breach 145.00 today. In view of the deeply overbought conditions, USD is unlikely able to maintain a foothold above 145.00 (the next resistance at 146.00 is unlikely to come under threat). Support is at 143.50 followed by 143.00. A break of the latter support level would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “We have expected USD to strengthen since early last week. As USD surged, in our latest narrative from yesterday (07 Sep, spot at 143.20), we indicated that the risk is clearly for further USD strength and the next level to watch is at 145.00. While our view turned out to be correct, we did not expect USD to approach 145.00 so quickly as it soared to 144.98 during London hours. USD could continue to rally but deeply overbought conditions suggests a slower pace of advance and at this stage, the chance for USD to rise to the 1998 high near 147.65 is not high. On the downside, a breach of 142.20 (‘strong support’ level was at 141.00 yesterday) would indicate that the rally in USD is ready to take a pause.”