Naoto Arase, Head of the Fintech Department at PPLS.
The dollar-yen exchange rate rose sharply on March 29 due to factors such as dollar-buying for actual demand by Japanese importers (dollar-buying/yen-selling related to the end of the fiscal year).
It was also affected by a resumption in selling of the yen due to the risk appetite set against the backdrop of a rapid rise in the dollar/yen and the cross-yen, and a challenge to dollar-buying/yen-selling following the breakthrough of the Ichimoku equilibrium.
And so after rebounding from the low of 130.41 recorded the previous day, the dollar/yen surged on Thursday to 132.89 – the highest price range since March 22.
From a technical standpoint, the chart shape is creating an impression of improved sentiment, such as the sudden upward break in the Ichimoku Kinko Hyo market participants were aware of.
There are major resistance points such as the 90-day moving average (133.32); the Bollinger mid-band (133.62); the 21-day moving average (133.74); and the Ichimoku Kinko Hyo reference line (133.78).
It is considered that further rises from now on will not be straightforward.
In terms of supply and demand, as well as events, eyes will be on the tricky flow related to the end of the fiscal year in Japan and the London fixing at the end of the month.
Attention will also focus on important events in Japan and the US, such as the March consumer price index in Tokyo and the February PCE deflator in the States.
Having reached March 31, there is concern regarding risk reversal – reactionary selling against a sharp rise – led by position adjustments the previous day.
Based on these factors, the forecast is for a reversal of the dollar-yen exchange rate as the main scenario.
The outlook could change from bearish to bullish if the market passes these US and Japan economic events and breaks through the aforementioned major resistance points.
Attention on Friday will be focused on the January-March quarter US GDP figures and the number of new applications for unemployment insurance in the US, as well as remarks by Federal Reserve Bank of Richmond President Thomas Barkin and his Boston Fed counterpart Susan M Collins.
