The dollar/yen pair rebounded from the low of 127.22 recorded on January 16, and then surged to 130.90 yesterday. The BOJ’s notification of the “fund-supplying operation against common collateral” is believed to have triggered the unwinding of yen longs by foreign investors. However, given that there are multiple resistance points in the upside, a reversal of the three roles (SANYAKU) suggesting a strong sell signal, and the downward trend of the Dow Theory continues, it can be judged that the upside potential is limited. In fact, yesterday fell short of reaching the high of 131.59, which was set just after last week’s Bank of Japan monetary policy meeting. In terms of fundamentals:

(1) the BOJ’s deep-rooted expectations for revisions to monetary easing (abolition of the YCC and exit from negative interest rates will continue to be factored in toward the next meeting on March 10 and the meeting in April following the retirement of Governor Kuroda).

(2) the US Fed’s speculation of monetary tightening and early suspension (the US entered a blackout period from January 21, but WSJ Nick, who is considered to be the spokesperson for the FED during post articles with dovish content → There is a high possibility that the terminal rate will not reach 5.00%).

(3) Against the backdrop of (1)and (2) above, the direction of monetary policy in Japan and the United States is different (the difference in monetary policy between Japan seeking the timing to end monetary easing and the United States seeking the timing to end monetary tightening). We have all the materials that are reminiscent of a decline in the yen exchange rate. Based on the above, we expect the trend of selling the dollar and buying the yen to continue (beware of the risk of a reversal after the round). Today, attention will be focused on the US January manufacturing, non-manufacturing and composite PMI preliminary figures and the US January Richmond Fed Manufacturing Index. From this week to next week, the market is expected to be led by the US dollar rather than the yen. We need to be careful because there is a risk that the market will be put under downward pressure again.

Today’s expected range:129.50-131.50

Analyst:Mr. Naoto Arase, Independent Analyst