I have been invited by Gogojan-sama to start writing from today.

※This article is a free article.

In this series, we will regularly post fundamental analysis that conveys market conditions changing daily and price charts for easy understanding.

Before getting into the main topic, I would like to start withthe roles of the market’s main players and supporting actorsas a preface.

When starting to invest, many people start with FX, that is, currency trading.

However, the true main players in the market are not currencies butbonds and stocks, with commodities following next, so currencies tend to bemore of a supporting role..In other words, currencies are in a secondary position.

This thinking is fairly simple and not a difficult topic; for example, if US investment progresses, Dow, S&P, and Nasdaq rise.

Since investments are made using dollars, the dollar also rises.

As with many people liking the pound, if investment becomes active in the UK, those who “hold” pounds find it easier to invest, leading the pound to become stronger.

Similarly, the pound rises.

Investment includes not only stocks but real estate and other assets, so some numbers may be hard to discern visually, but essentially it works this way.

Among these, I used the dollar as an example, but regarding the dollar, the yen, and the euro, there is a large global circulation and they have safe-haven aspects, so continued buying is not common.

That is because many people hold these three currencies; when the US rises, others may rise as well, leading to using the dollar to invest in Australia or investing in the UK with dollars.

When a risk-off state occurs, funds flow out of emerging markets and investment-target countries, and capital returns to the three major currencies (cash-out), causing the dollar, yen, and euro to rise.

Separately, there is also the basic question of where to keep funds to earn profits—this is a fundamental consideration.

For a long time, Japan has considered saving as normal, storing funds in Japanese banks.

Except during the bubble era, today this is tantamount to dead storage.

The reason is straightforward: during the bubble era, savings interest was about 8%.

If you deposited 1 million yen, it would become 1.08 million after one year.

There was no need to invest in stocks or other investments, right?

But in modern times, even the highest time-deposit interest is about 0.2%.

Depositing 1 million yen would grow to only 1,002,000 yen after one year.

This is a personal-level discussion, but you can understand that leaving money in the bank has little meaning nowadays.

But you might think, if I deposit, the funds won’t decrease and might increase… right?

That is also somewhat incorrect.

In practice, as seen with USD/JPY and cross yen pairs, the value of the Japanese yen fluctuates daily.

In other words, simply holding currency exposes you to fluctuation risk.

In real life, prices of goods don’t rise daily, so it’s hard to notice, but if the world sees the value of the yen declining, relative wealth will shrink.

If we consider not personal level but government agencies, banks, and hedge funds that move the market, the fluctuation risk becomes enormous.

In other words, whether it is cash, stocks, commodities, or bonds,the investment core is deciding where to place funds so they do not shrink but increase.

The largest market by trading volume is government bonds issued by each country.

Particularly for the cornerstone currency, the US dollar, the major US Treasury bonds are extremely liquid, and even if the world moves based on US interest rates, it is not far from true.

Next come stocks. Roughly, their trading volume is about half of bonds.

Then commodities and currencies follow.

By now you may have noticed that the natural flow is that currencies move to invest in stocks, bonds, and commodities introduced at the beginning.

To grasp the entire market, we will proceed with analysis by recognizing the environment using bond yields and stock charts, and then mapping them to currencies.

In this series, we hope to also convey the knowledge necessary for conducting analysis.

Market's leading role and supporting role