Sotō Masakazu's Practical Trading Techniques for Foreign Exchange Online | Techno & Fundamental Analysis Predicting the Future of the 3 Major Currencies [This Month's Theme | If you want to build a long-term market outlook, pay attention to the period

One of the technical indicators I frequently use is the moving average with a period set to 200 (hereafter, SMA). The 200-day SMA on the daily chart is known as a highly watched technical indicator by overseas investors, but the 200-week SMA on the weekly chart is even more important. This time, focusing on the 200-day SMA, 200-week SMA, and next the 120-day SMA and 120-week SMA, let’s look ahead to the outlook for major currency pairs.

Profile of Masakazu Sato

Sato Masakazu. After working at a Japanese bank, he joined the French Paribas Bank (now BNP Paribas Bank). He has served as Interbank Chief Dealer, Head of the Funds Department, Senior Manager, and other roles. He later became Senior Analyst at FX Online, which boasts the largest annual trading volume. With over 20 years in the world of forex, he appears on Radio NIKKEI “Stock Full Live Commentary! Stock Channel,” and Stock Voices “Market Wide Foreign Exchange Information,” and regularly provides market information on Yahoo! Finance.

The 200-day SMA becomes the focal point for USD/JPY. Will it break through or slip below? What will the outcome be!?

2020, which opened amid military tensions between the United States and Iran, began with turmoil continuing from 2018 and 2019. Nevertheless, with progress in US-China trade negotiations and the impact of the Fed’s “QE4 hidden” that began in October 2019, the US stock market continued to hit record highs, making the “Trump Bubble” seem likely to persist for some time.

In this environment, since October 2019 the USD/JPY has traded in a range around 107–110, moving up and down as it either broke through or slipped below the 200-day SMA, with directionless sideways movement. The 200-day SMA is an important technical indicator watched by overseas institutions. Not only the 200-day SMA on the daily chart, but also the 200-hour SMA on the hourly chart, the 200-week SMA on the weekly chart, and the 200-month SMA on the monthly chart — in short, any SMA with the period “200” — have a significant influence on exchange rate movements.

Therefore, this time we will focus on the 200SMA and try to forecast the movements of major currency pairs in 2020.

Chart ① is the USD/JPY daily chart from April 2019 after it reached the high 112 yen range. In recent months, USD/JPY has repeatedly moved above and then slipped below the 200-day SMA. At the beginning of 2020, following the killing of an Iranian general, the 120-day SMA, which had acted as a support, fell to around 108 yen.