The Future of the Foreign Exchange Market Episode 115 [Tomotaro Tajima]
Tomotaro Tajima Profile
Economic analyst. Alfinants President & CEO. Born 1964 in Tokyo. After graduating from Keio University, he switched careers following his time at Mitsubishi UFJ Securities. He analyzes and studies a wide range from finance and economics to strategic corporate management, and even individual asset formation and fund management. He serves as a lecturer for lectures, seminars, and trainings hosted by private companies, financial institutions, newspapers, local governments, and various business associations, with about 150 lectures per year. He has contributed to numerous print media series and commentary, such as Weekly Gendai “Rules of Net Trade,” Examinina “Money Maestro Training Course,” and more. He has written stock and foreign exchange columns on numerous websites, earning high regard as a stock and FX strategist. He also writes the Home Economics section of Jiyu Kokuminsha’s “Kotoba no Kiso Chishiki” (Fundamentals of Modern Terms). After regular appearances on TV (TV Asahi “Yajuuma Plus,” BS Asahi “Sunday Online”) and radio (MBS “Megane-chan no Asaichi Radio”), he currently serves as a regular commentator on Nikkei CNBC’s “Market Wrap” and Daiwa Securities Information TV’s “Eco no Marche.” His main DVDs include “Super Easy: Tomotaro Tajima’s FX Introduction” and “Super Easy: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Wealth Reevaluation Manual” (Pal Publishing), “FX Chart ‘Profit’ Equation” (Alchemix), “Why Can FX Make You Rich in Assets?” (Texts), and many more. His latest publication is “How to Profit by Riding the Rising US Economy” (Jiyu Kokuminsha).
※This article is a reprint/edit of an article from FX Tactics.com, November 2019. Please note that the market information in the text may differ from current market conditions.
Trump-related Developments Are Hard to Predict and a Headache for Investors
Looking back, August saw unusually large moves in USD/JPY. More accurately, since August 1, the range was decisively lowered. June and July were neatly contained within the 107–109 yen range, but after August 2, the range shifted to 105–107 yen. The factors behind the dollar weakness and yen strength are, unsurprisingly, the deepening stalemate of the US-China hegemonic rivalry.
To refresh a bit: On August 1, US President Trump suddenly indicated that the “Fourth” tranche of tariffs on China would be imposed from September 1, and on August 5, the US Treasury designated China as a “currency manipulator.” In response, China announced a temporary halt in imports of certain US farm products, worsening bilateral relations, and in early August the USD/JPY repeatedly touched below 105.
However, on August 13, Trump quickly announced postponement of part of the tariffs before his own words could dry up, and the market mood brightened. USD/JPY temporarily attempted to reclaim the 107 level.
Moreover, the situation swung again: on August 23, the State Council of China suddenly announced retaliation against the US. That alone would have further pushed down US 10-year yields, but combined with Trump’s tweets like “We don’t need China,” and reports that the USTR would raise tariff rates, the dollar-bearish momentum grew even more.
Ultimately, at the start of the following week on the 26th, USD/JPY opened below 105 in Asia and briefly fell to 104.45, but soon Trump stated that “China wants a deal with the US,” boosting hopes for progress in negotiations, and USD/JPY regained into the 106s—the rapid, dizzying turn of events.
In short, lately financial markets have tended to move dramatically depending on Trump’s tweets, creating what one might call a “Trump-matter” market dynamic.
Of course, much of this is likely the work of algorithmic trading overreacting to Trump statements, and as long as that reality persists there is little to complain about. In that sense, the outlook is highly unpredictable, investor-unfriendly, and simultaneously a headache for commentators. Additionally, for technical analysts, the current environment is extremely challenging, with signals that would normally be useful failing to fulfill their role.
