The dollar-yen pair turned to a rebound from the high of 106.96 recorded on August 28, and then plummeted to 104.00 (the lowest price in about half a year) on September 21 at the beginning of the week.

During this period, the Ichimoku Kinko Hyo reference line and turning line, the Bollinger midband and the Ichimoku Kinko Hyo cloud lower limit were broken, the three-role reversal suggesting a strong selling signal, and the bearish band walk suggesting a strong downtrend were also established.

From a technical point of view, it has a chart shape that impresses with “weakness of formation” (although it has turned to repulsion at the feet, return sales are persistent in the mid-105 yen range).

From a fundamental point of view,

(1) Differences in the direction of Japan-US monetary policy (While the Japanese side remains uncertain about the smooth transition from avenomics to suganomics, the US side has a zero interest rate policy by 2023.  (Suggesting the continuation of),

(2) uncertainty about the future of US fundamentals,

(3) risk of sharpening the US-China conflict,

(4) uncertainty about the future of US politics (a sense of caution about the US presidential election scheduled for November 3),

(5) Geopolitical risks surrounding the Korean Peninsula, the Middle East, and Hong Kong,

(6) Risk of re-spreading the infection of the new corona virus (a sense of caution about the second wave reignites mainly in Europe and the United States),

(7) Uncertainty about the future of the Japanese economy (Japan’s economic outlook)  Uncertainty → Concerns about deflation → Rise in real interest rates of the yen → appreciation of the yen),

(8) Divergence between the real economy and the stock market (be wary of unwinding the excess liquidity market),

(9) Rekindling the risk of withdrawal without an agreement of Brexit etc.

There are a lot of uncertainties reminiscent of the decline (because dollar buying and yen buying occur at the same time in the risk avoidance phase, the depreciation of the straight currency → the cross yen depreciation → the spillover route of the dollar-yen depreciation is wary).

As mentioned above, the dollar-yen exchange rate is expected to develop a return selling advantage both technically and fundamentally.  We anticipate (assuming a scenario of dollar buying of asset cashing demand → plunge in commodity prices → currency depreciation of resource-rich countries → cross yen depreciation → dollar-yen depreciation)

Today’s forecast range: 104.75-105.75

Analyzed by: Mr. Naoto Arase,Independent Analyst