USD/JPY: a moderate rebound could be on the cards – UOB

FX Strategists at UOB Group did not rule out the possibility of a squeeze higher in the near term.

Key Quotes

“We highlighted two days (07 Mar, spot at 105.60) that while the undertone in USD has weakened, “only a NY close below 105.20” would indicate the start of a bearish phase. The major support was unchallenged as USD closed marginally higher at 106.20 in NY yesterday”.

“However, at the time of writing, USD surged and took out the strong resistance levels at 106.45 and 106.70 with ease. The up-move is accompanied by strong momentum and while it is too early to expect the start of a sustained rally, the price action indicates an increasing risk of a stronger recovery”.

“From here, we expect USD to stay underpinned (at least for the next few days) and further strength towards 107.65 would not be surprising. The next resistance is at 107.90 and a break of this level would indicate that last week’s 105.23 low is a more significant bottom than currently expected”.