The dollar/yen exchange rate turned downward from the year-to-date high of 136.93 recorded on February 28, and fell sharply to 135.26 due to position adjustments. Multiple support points are lined up on the downside (90-day moving average, Ichimoku Kinko Hyo conversion line, and Ichimoku cloud upper limit functioned as support yesterday), and the Ichimoku shows three roles (SANYAKU)suggesting a strong buy signal. A short-term move is expected to test the 200-day moving average traded near 137.21.

Considering that the uptrend has been established and the Dow Theory’s upward trend is continuing, it can be judged that the sentiment is strong from a technical point of view.

In terms of fundamentals, the spread of speculation about reacceleration of monetary tightening in the United States and Europe on observations of Fed and ECB terminal rate hikes, receding expectations for an early revision of monetary easing by the Bank of Japan, There are factors that suggest a rise in the dollar-yen and cross-yen exchange rates, such as the monetary policy gap (expectations for the resumption of the yen carry trade due to the widening interest rate differential between Japan, the United States, and Europe).

Based on the above, we continue to forecast the continuation of the strong dollar/weak yen trend as the main scenario. On the other hand, the risk scenario for the main scenario above is the transmission path of “disappointing results of US economic indicators → receding speculation of reacceleration of monetary tightening → decline in US interest rates → US dollar selling → dollar/yen depreciation”.

In fact,

1. the US economic indicators for February released in the last two days are the Chicago Purchasing Departments Index for February (result 43.6, forecast 45.3),

2. the US Conference Board Consumer Confidence Index for February (result 102.9, 108.5),

3. US February Richmond Fed Manufacturing Index (Result -16, Forecast -5),

4. US February Manufacturing PMI (Result 47.3, Forecast 47.8),

5. US February ISM Manufacturing Index (Result 47.7, Forecast) 48.0), all fell short of market expectations. If such data continues, as Richmond Fed President Barkin pointed out on February 17, could the unexpectedly strong January data be just a seasonal factor? There is also a fear that it will lead to suspicions about the future, so it is necessary to be vigilant against downside risks just in case. Today, attention will be focused on the number of new applications for unemployment insurance in the United States and the lecture by FRB Director Waller.

Today’s expected range: 135.25-136.75

Analyst: Mr. Naoto Arase, Independent Analyst