Further upside could motivate USD/JPY to challenge the firm resistance at 136.80 in the near term, according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We did not anticipate the strong surge in USD as it rallied to a high of 135.76 in late NY and then extended its advance in early Asian trade. Not surprisingly, conditions are severely overbought but with no signs of weakness just yet, USD could edge higher today. In view of the overbought conditions, the major resistance at 136.80 is likely out of reach today (there is another resistance at 136.30). Support is at 135.50, a break of 135.20 would indicate that the USD strength has eased.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (11 May, spot at 134.20) wherein ‘while downward momentum is building again, the likelihood of USD dropping to 133.00 has not increased much’. We did not expect the strong surge of 0.87% (NY close of 135.71) on Friday. The breach of our ‘strong resistance’ of 135.50 indicates that the downside risk has faded. While the risk has shifted to the upside, it is worth noting that there is a solid resistance near 136.80 ahead of the early May high near 137.80. Overall, only a breach of 134.80 (‘strong support’ level) would suggest USD is not ready to head higher towards 136.80.”