Dollar/yen rose to a high of 108.09 for the first time in a month on May 19th, but after sluggish backed by the 200-day moving average at 108.30, it started to decline.

The flight time at the 108-yen level is extremely short, and from a technical point of view, it has a chart shape that impresses the “weight of the upper price” (* 5/26 high price 107.93, 5/27 high price 107.94 for 2 consecutive days failed to put 108 yen).

In terms of fundamentals,

(1) the difference in monetary policy capacity between Japan and the US (Japan, which has little room for additional easing, and the US, which has a large room for additional easing)

(2) uncertainty about the future of US fundamentals

(3) intensifying US-China conflict concerns (relationship with the United States has worsened over Hong Kong. US President Trump’s development of strengthening hardline stance against China)

(4) Geopolitical risk over the Korean Peninsula, Middle East and Hong Kong

(5) Secondary infection risk of new coronavirus (Secondary infection risk due to deregulation of going-out restrictions)

(6) Uncertain outlook for the Japanese economy (deceleration of inflation → rise in real interest rates → yen appreciation), etc.

As mentioned above, the dollar-yen is wary of “fall risk” both technically and fundamentally. Since the relaxation of global outing regulations has already been incorporated, it is necessary to be cautious about the risk after one round.

The headline over intensifying US-China confrontation (* Also pay attention to the standard value against the US dollar announced by the People’s Bank of. )

If the Chinese authorities put out a stance to allow the yuan to restrain the United States, Yen buying and dollar buying may be encouraged due to speculation about a weak currency competition, and US economic indicators have resulted in a press conference by Prime Minister Li Keqiang following the closing of the NPC (including the adoption of the National Security Act in Hong Kong).

Although we are staring at it, we anticipate that the dollar-yen exchange rate will fall as the main scenario (expiration of the risk-on exchange rate → stock depreciation, crude oil price depreciation → cross-yen sales → be cautious of the dollar-yen decline).

Today’s expected range: 107.00-108.00

Analyst：Naoto Arase, Head of Fintech of Goldwell Capital