The Future of the Foreign Exchange Market Episode 104 [Tomotaro Tajima]
Tomotaro Tajima Profile
Economic analyst. President and CEO of Alfinauntsu. Born in Tokyo in 1964. After graduating from Keio University, he switched careers following work at current Mitsubishi UFJ Securities. He analyzes and studies a wide range from finance and the overall economy to strategic corporate management, and even personal asset formation and fund management. He serves as a lecturer for lectures, seminars, and training organized by private companies, financial institutions, newspapers, local governments, and various chambers of commerce and industry, with about 150 talks per year. He has contributed to numerous print media as a columnist and commentator, including Shukan Gendai’s “The Codes of Internet Trading,” Examinia’s “Money Maestro Training Course.” He has written stock and foreign exchange columns on many websites and is highly regarded as a stock and FX strategist. He also writes for the Home Economics section of Kodansha’s Jiyu Kokuminsha “Gendai Yōgo no Kiso Chishiki.” After regular appearances on TV (TV Asahi “Yaju-uma Plus,” BS Asahi “Sunday Online”) and radio (MBS “Kyo-chan no Asa-ichi Radio”), he currently serves as a regular commentator on Nippon TV CNBC “Market Wrap” and Daiwa Securities Information TV “Economy Marche.” His main DVDs include “Very Easy to Understand: Tomotaro Tajima’s FX Introduction” and “Very Easy to Understand: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Asset Reassessment Manual” (Paru Publishing), “FX Chart ‘Formula for Profit’” (Alchemix), “Why Can FX Make You Asset Rich?” (Texts), among many others. The latest publication is “How to Profit by Riding the Rising US Economy” (Jiyu Kokuminsha).
*This article is a reprint and revision of an article from FX攻略.com, December 2018 issue. Please note that the market information written in the main text does not reflect the current market.
Take the signals appeared in late August as a reference for the future!
In the previous update, the author stated, “In hindsight, the ‘shadow extremum’ for the USD/JPY market was probably the period from August 17 to the Monday following, August 20.” In fact, on August 21 the USD/JPY briefly fell to as low as 109.77, but ultimately formed a bullish candle with a lower shadow, and after some time around 111 yen, by the time of writing, there were moments when it rose into the 113 yen area.
As mentioned before, it is important to sense changes in market trend with a perceptive “skin-like feel.” For example, in late August, Reuters was reporting “foreign buyers flooding in due to Turkish lira weakness.” When such unusual news swirls around, the market often reaches a “selling climax” timing.
Of course, simply relying on a “skin feel” to detect a trend change in the market would be too reckless. Then, what other kinds of “information” are necessary? It would be various signals obtained from technical analysis.
To recap, fundamentals generally influence the direction (vector) in which the market moves; to anticipate the level (the reference point) at which it may stop moving downward or upward, technicals are essential. For example, during the Brexit shock in June 2016 (often cited), the direction for USD/JPY clearly pointed down, but where it would stop falling depended ultimately on where the 62-month moving average located.
From this perspective, when revisiting the USD/JPY “shadow extremum” in late August, the close on August 20 at 110.06 yen indeed matched the 61.8% retracement of the rise from the May 29 low to the July 19 high. In addition, the lower bound at that time was supported by the weekly Ichimoku cloud’s lower boundary.
In other words, after reaching multiple levels and stopping the decline, USD/JPY rebounded technically and returned to test the July high of 113.18 yen by the time of writing. Thus, from late August to late September, USD/JPY tended to lean bullish, supported by another factor: the rise of the Nikkei Stock Average (the stock market).
As mentioned in the previous update, September is a time when overseas players return to the market and market activity picks up, so a bit of a rally toward year-end could be expected.
In short, from late August to early September, overall it was a favorable time to buy USD/JPY. Of course, this may be a “past event,” but it is worth recognizing that such considerations can be useful later on.
