USD/JPY could now move into some consolidative phase prior to a potential advance to 135.50, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘the bias for USD remains on the upside’ but we were of the view that ‘any advance is unlikely to break the major resistance at 135.00 today’. Our view for USD to strengthen was correct even though it rose above 135.00 (high of 135.04) before pulling back sharply. The pullback amid overbought conditions suggests USD has likely moved into a consolidation phase. Today, we expect USD to trade sideways, likely within a range of 133.80/134.80.”

Next 1-3 weeks: “We turned positive USD last Wednesday (15 Feb, spot at 132.90. As USD rose, in our latest narrative from Thursday (16 Feb, spot at 133.85), we indicated that ‘upward momentum has improved further and USD is likely to continue to advance’. We noted, ‘The next level to watch is at 135.00, followed by 135.50’. Our target level of 135.00 was met as USD rose to a high of 135.04 on Friday. From here, overbought short -term conditions could lead to a couple of days of consolidation. As long as 133.10 (‘strong support’ level was at 132.80 last Friday) is not breached, there is still chance for USD to head higher to the next target at 135.50 later on.”