Extra gains in USD/JPY now target the 139.60 region according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that USD ‘could break above the month-to-date high near 137.80 but in view of the severely overbought conditions, it might not be able to maintain a foothold above this level’ We added, ‘the next major resistance at 139.00 is unlikely to come under threat’. The pace of the advance exceeded our expectations even though USD did not challenge 109.00 (high has been 138.74). Upward momentum appears to be slowing and USD is unlikely to advance much further. Today, it is more likely to trade between 137.80 and 138.80.”

Next 1-3 weeks: “Yesterday (18 May, spot at 137.45), we indicated that ‘conditions are severely overbought but USD could break 137.80; the next level to focus on above this level is 139.00’. In NY trade, USD soared to a high of 138.74. While we continue to expect USD to strengthen further, overbought short-term conditions could lead to a couple of days of consolidation before USD resumes its rally, albeit likely at a slower pace. Looking ahead, the next resistance above 139.00 is at 139.60. The USD strength is intact as long as it stays above 136.80 (‘strong support’ level previously at 136.00).”