The Future of the Foreign Exchange Market Episode 117 [Tomotaro Tajima]
Tomotaro Tajima Profile
Economic analyst. President and CEO of Alfinaunts. Born in Tokyo in 1964. After graduating from Keio University, he redirected his career from Mitsubishi UFJ Securities (current) and now analyzes and researches a wide range from finance and the overall economy to strategic corporate management, and ultimately individual asset formation and fund management. He serves as a lecturer at lectures, seminars, and training sessions organized by private companies, financial institutions, newspapers, local governments, and various business associations, with about 150 talks per year. He has written many serials and comments in print media, including Weekly Gendai “Rules of Internet Trading” and Examinina “Money Maestro Training Course.” He also writes columns on numerous websites about stocks, foreign exchange, etc., and is highly regarded as a stock and forex strategist. He also contributes to the Home Economics section of the Free Press “Gendai Yogo no Kiso Chishiki.” He has regular appearances on television (TV Asahi “Yawaraka Plus,” BS Asahi “Sunday Online”) and radio (MBS “Sure-chan’s Asai-chi Radio”), and currently serves as a regular commentator on Nikkei CNBC “Market Wrap” and Daiwa Securities Information TV “Economy Marche.” His main DVDs include “Extremely Easy to Understand: Tomotaro Tajima’s FX Introduction” and “Extremely Easy to Understand: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Manual for Reassessing Wealth” (Paru Publishing), “FX Chart ‘Formula for Profit’” (Alchemix), “Why Can FX Make You Asset-Rich?” (Text), and many others. His latest book is “How to Profit by Riding the Rising U.S. Economy” (Free Press).
※This article is a republished and revised version of an article from FX攻略.com, January 2020 issue. Please note that the market information described herein may differ from the current market.
If U.S. stock indices reach new highs, USD/JPY could push higher
In the previous update for this column, regarding the September Dow Jones Industrial Average, we noted that “it approached the all-time high of 27,398 dollars reached in July this year,” and that the risk-on mood that had surged would “in September, as U.S. and Japanese stock prices rose, there was naturally growing caution about near-term highs (a possible pullback).”
As expected, at the beginning of October the U.S. and Japanese stock prices briefly fell sharply. A major factor was the September ISM Manufacturing Index released on October 1, which hit a ten-year pandemic-low level. As a result, the Dow fell temporarily into the 25,700s.
In this case, it was not solely the deterioration of U.S. indicators that caused concerns about U.S. economic slowdown and contributed to the stock sell-off; the earlier one-time strong rebound in stock prices left investors with lingering near-term high cautions. Therefore, at the time of writing, the market is again testing near-term highs in U.S. stocks, and I believe it is prudent to remain vigilant about near-term risks.
Of course, if a major U.S. stock index breaks above its all-time high with only modest near-term adjustments, there is a strong possibility of further upside, which could in turn cause significant changes in the USD/JPY and cross Yen rates.
After all, for USD/JPY this year, the range between the year-to-date high (112.40) and the low up to the time of writing (104.45) has been only about 8 yen, an unusually small range. Even in 2018 the annual USD/JPY range was about 10 yen, so if we expect at least a similar range this year, it wouldn’t be surprising to see USD strengthen toward the mid-114s by year-end.
