The USD/JPY plunged from 133.01 to 131.01 after passing the FOMC’s 25 basis point rate hike decision, the main event of the week. Considering the chart is expected to reversal in three roles (SANYAKU) suggesting a strong sell signal within a few days,we can judge that the sentiment is weak from a technical point of view.

In terms of fundamentals:

1. Concerns about the global financial system continue to smolder,suggesting rescue purchases by UBS,dollar funding by major central banks,and government intervention by US Treasury Secretary Yellen.In response to the remarks,credit anxiety has temporarily receded,but it has not reached a substantial resolution,and caution is required when the risk-off phase resumes after the cycle has run its course.

2. Observation that the US FRB will suspend monetary tightening (delete the phrase “ongoing increases” in the FOMC statement).

3. Speculation that the Japan-US interest rate differential will narrow (observation that the yen carry trade will dissolve).

4. Reassessment of the yen’s status as a safe haven currency during the risk aversion phase (currencies that are generally bought during the risk aversion phase are the yen,the US dollar, and the Swiss franc,but the current credit uncertainty since the epicenters are “United States” and “Switzerland”, the “yen” is likely to be preferred in the process of elimination.

Based on the above,we continue to forecast the continuation of the dollar-selling/yen-buying trend as the main scenario (a combination of risk-averse yen-buying+dollar-selling due to the decline in US interest rates+yen-buying due to the cancellation of the yen carry trade).

Today,we will focus on the October-December quarter current account balance, February Chicago Fed National Activity Index,US new jobless claims,February new home sales,and Kansas City Fed March Manufacturing Activity Index,will gather.If the US fundamentals are not as good as expected,the US dollar/yen pair may fall further and accelerate as the US economy enters a recession,so caution is required.

Today’s expected range:130.25-132.25

Analyst: Mr. Naoto Arase, Independent Analyst