Foreign Exchange Online · Masakazu Satō's Practical Trading Techniques | Techno & Fundamental Analysis Forecasting the Future of the 3 Major Currencies [This Month's Theme | The United States' Solo Victory and the Beginning of China's Decline; Outlook

2020 will be a milestone year in a decade and likely a year that foreshadows the birth of new trends. In recent years, many major currency pairs, including the dollar-yen, have traded in a range-bound market, so there doesn’t seem to be much sharp exchange-rate fluctuation expected in the first half of this year. However, history shows that a market that has been compressed will eventually explode in one direction. In 2020, how will the foreign exchange market move?

Masakazu Sato Profile

Sato, Masakazu. After working at a domestic bank, he joined BNP Paribas (now BNP Paribas) in Paris as part of a French bank. He has served as an interbank chief dealer, head of the funds department, senior manager, and more. Later, he became Senior Analyst at FX Online, which boasted the highest annual trading volume. He has over 20 years of experience in the world of currency. He appears on Radio Nippon “Complete Live Commentary on Stocks! Stock Man” and Stock Voice “Market Wide - Foreign Exchange Information,” and regularly provides market information on Yahoo! Finance.

The Range-Bound Dollar/Yen, Which Gives a Sense of the Market’s “Death,” Will Continue This Year? A 104 to 114 Yen Range Is Likely

In this first issue of the new year, we forecast the major currencies for 2020 using long-term charts. The 2019 foreign exchange market was driven by the U.S.–China trade war; continued rate cuts by the Federal Reserve from July to October; and notable themes outside the United States such as China’s economic slowdown, the United Kingdom’s Brexit and Hong Kong democracy protests. The market’s disruptive factor, as you know, was President Trump’s tweets on tariffs against China.

However, looking back on the dollar-yen price movement in the long-term chart, it was a year that remained in a “slightly downward-sloping, very narrow range.” The range spanned only 8 yen, from a high of 112 in April to a low of 104 in August. When we look at several recent years’ movements, it’s easy to feel that the dollar-yen market has reached a potential equilibrium point given the current economic conditions of the two countries, and may not move much higher or lower.

Going forward, unless there are dramatic changes in the two economies—such as a genuine decline in the U.S. economy after a “Trump bubble,” or the Fed’s rate hikes, or Japan’s rapidly expanding fiscal deficit and the end of the Bank of Japan’s quantitative easing—it's unlikely that 2020 will see the yen weaken beyond 120 per dollar or strengthen below 100 per dollar.