Further upside in USD/JPY looks likely, although the pair faces a tough resistance around 139.50, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to ‘consolidate and trade within a range of 138.15/139.00’. USD subsequently dropped to 138.03, popped briefly to 139.06 before easing off to end the day little changed at 138.79 (+0.07%). Despite the breach of 139.00, upward momentum has not improved. In other words, USD is unlikely to advance further. For today, we expect USD to trade sideways between 138.10 and 139.10.”

Next 1-3 weeks: “On Monday (29 Aug, spot 138.30), we turned positive USD and expected it advance to 139.00. After USD rose to 139.00, we highlighted yesterday (30 Aug, spot at 138.60) that further USD strength is not ruled even though the 139.00 level is a tough resistance and may be tough to break. We added, ‘a break of 139.00 would shift the focus to 139.50’. USD subsequently popped briefly above 139.00 (high of 139.06) before pulling back sharply. While upward momentum has barely improved, the outlook for USD is still positive. However, it may take a while before the major resistance at 139.50 would come into the picture. To look at it another way, USD could consolidate for a few days first. On the downside, a breach of 137.40 (no change in ‘strong support’ level from yesterday) would indicate that USD is unlikely to advance further.”