Markets Strategist at UOB Group Quek Ser Leang suggests further upside in USD/JPY is expected to meet a solid hurdle around 145.00.

Key Quotes

Our last Chart of the Day was from 17 Jul 2023, when USD/JPY was trading at 139.90. The title of our update was “Risk for USD/JPY is still on the downside. In order for a sustained decline in the next couple of months, USD/JPY must break the critical support at 138.50.” We noted that “Both the rising trendline (connecting the lows of Feb and the 137.23 low) and the bottom of the daily Ichimoku cloud are near 138.50.” 

After our update, USD/JPY fell to a low of 138.05. While the decline breached the trendline support, it did not quite break below the bottom of the daily Ichimoku cloud. The decline was short-lived, as USD/JPY snapped back up and broke above the solid resistance level at 141.95 (USD/JPY rose to a high of 143.89 last week). Upward momentum appears to be building, and USD/JPY is likely to trade with an upward bias from here. However, July’s high near 145.05 is a major resistance and might not be easy to break. Overall, only a breach of 140.55 (the current level of the 55-day exponential moving average) would indicate that the upward bias has faded.