In light of the recent price action, USD/JPY could now attempt an advance to the area above 114.00 the figure in the next weeks.
24-hour view: “We highlighted yesterday that ‘upward momentum is beginning to show tentative signs of slowing’. We added, ‘this coupled with still overbought conditions suggests that USD is unlikely to strengthen much further’ and we expected USD to ‘trade between 113.15 and 113.80’. Our view was not wrong even though USD traded within a slightly narrower range than expected (113.21/113.80). The price actions are viewed as part of an on-going consolidation. In other words, we continue to expect USD to trade sideways, albeit at a lower range of 113.10/113.75.”
Next 1-3 weeks: “On Tuesday (12 Oct, spot at 113.40), we highlighted that the impulsive surge suggests that further USD strength would not be surprising and that the next resistance is at 114.20. There is no change in our view for now even though overbought shorter-term conditions could lead to a couple of days of consolidation first. The USD strength is deemed intact as long as it does not breach 112.80 (‘strong support’ level was at 112.65 yesterday).”