[Today's Exchange Rates] Are the Dollar-Yen pair facing a clash between dollar buying and yen buying!? A turbulent week ahead with Middle East tensions, the US midterm …

Hello! This is FX Mama ٩( ᐛ )و♪

November has started today!

Speaking of November, it’s a busy time as we head toward the end of the year, but the foreign exchange market is no exception (lol).

This week is packed with major events that will move the market, including policy interest rate announcements from Australia and the UK, the US midterm elections, and the US employment report!

Furthermore, with the situation in the Middle East becoming unstable, the foreign exchange market is in a state where it just can’t settle down.

The dollar-yen pair even fell to the 156 yen range at one point, only to rebound to the mid-157 yen range.

It goes up, then it goes down.
It goes down, then it goes back up.

It’s like a roller coaster ride (lol).

This time, I will explain the outlook for the exchange market on Monday, November 2nd, in a way that is easy for FX beginners to understand♪

I will explain difficult economic news using familiar terms as much as possible, so please be sure to read until the end!

1. The dollar-yen pair is seeing a mix of dollar buying and yen buying! Which one is actually stronger?

First, let’s look at today’s main subject, the dollar-yen pair.

In the overseas market at the end of last week, the dollar-yen pair fell to the 156 yen range at one point.

However, it was bought back afterward and finished trading having recovered to the mid-157 yen range.

In other words, although it fell, the yen did not simply continue to strengthen unilaterally.

So, why did this happen?

One of the major reasons is the sharp drop in US high-tech stocks.

After the market closed last Thursday, corporate earnings for companies like Amazon and Intel were announced.

Intel stock, in particular, saw a massive drop of 28.6%!

28.6%, you know…

If you held 1 million yen worth of stock, that’s a decline rate where you would lose about 280,000 yen by simple calculation.

That’s a number that investors can’t really laugh about, right?

When high-tech stocks are sold off heavily, caution regarding the stock market as a whole intensifies.

Then, investors try to sell off high-risk assets and move their funds to assets considered relatively safe.

This is called “risk aversion.”

In the foreign exchange market, the yen is sometimes bought in such situations.

As a result, downward pressure was applied to the dollar-yen pair.

However, the existence of the dollar makes this a bit complicated.

Usually, when anxiety rises globally, funds also tend to gather in the US dollar, which is the key currency.

In other words,

・The dollar is bought as a safe asset.
・The yen is also bought due to risk aversion.

It is possible for these two things to happen at the same time.

The dollar is bought.
The yen is bought.

It’s truly a tug-of-war in the foreign exchange market (lol).

Since the dollar-yen pair moves based on the power balance between the dollar and the yen, it becomes difficult to find a sense of direction when both are being bought.

This week, I want to be careful about this trend where dollar buying and yen buying intersect.

2. The Middle East situation is tense again! Will it affect the foreign exchange market?

Another thing I want to focus on this time is the situation in the Middle East.

Over the weekend, there were reports that two tankers were exploded and set on fire by Iranian sea mines.

Furthermore, President Trump’s mention of an attack on Iran after the US midterm elections has also heightened market caution.

Why does the exchange market move when the Middle East situation becomes unstable?

The key point is crude oil.

The Middle East region is a very important region for global energy supply.

If military tensions rise and there are obstacles to tanker navigation or crude oil transport, crude oil prices could rise.

If crude oil prices rise, the impact could spread to gasoline prices, electricity bills, logistics costs, and more.

If corporate costs increase, it could lead to rising prices.

And if prices rise, it will also affect how central banks in each country decide on interest rates.

In other words, the Middle East situation is not just political news; it is connected to the global economy and financial policy.

Furthermore, when geopolitical risk rises, investors try to avoid risk.

As a result, yen buying and dollar buying could strengthen.

However, which one becomes dominant depends on the market environment at that time.

I want to watch this without making any assumptions.

As FX Mama, I believe it is important not to force profits in times like these.

It is dangerous to trade with the usual feeling when the market is rough.

A market that was moving normally until yesterday might suddenly move significantly today.

Even if you ask the market, “Please move calmly today♪,” it won’t listen to you (lol).

3. This week is packed with events! The foreign exchange market is very busy!

This week, important events from various countries are concentrated.

I especially want to focus on the following four.

First, the Australian policy interest rate announcement on November 3rd.

Next, the US midterm elections, also on November 3rd.

On November 5th, the UK’s monetary policy announcement.

And on November 6th, the US employment report is scheduled.

With so many events overlapping, the foreign exchange market has no time to settle down, does it?

Let’s check them one by one.

4. Australia’s policy interest rate announcement! Focus on the Australian dollar♪

On November 3rd, there will be a policy interest rate announcement from the Reserve Bank of Australia (RBA).

In the current market forecast, the policy interest rate is expected to be raised from the current 4.60% to 4.85%.

In other words, a 0.25% rate hike is expected.

What is a policy interest rate in the first place?

Simply put, it is the interest rate decided by the central bank while looking at the economic and price situation.

When interest rates are raised, the currency of that country generally tends to be bought more easily.

This is because higher interest rates can increase the appeal of holding that country’s currency.

If a rate hike occurs as expected this time, it could be a positive factor for the Australian dollar.

What I, FX Mama, am particularly focusing on is AUDJPY (Australian dollar-yen).

If the Australian dollar is bought, it will be a factor for the rise of the Australian dollar-yen.

However, what I want to be careful about here is that “rate hike = always rise” is not necessarily true.

Since the market expects a rate hike before the announcement, that information may already be priced into the value.

Even if a rate hike is implemented, if a cautious stance on future rate hikes is shown, the Australian dollar could conversely be sold.

What is important is not just the interest rate number, but the part about what kind of policy the central bank will show in the future.

Those who are trading AUDJPY, please be careful about sudden price movements immediately after the announcement♪

5. US midterm elections! How will reports of Democratic dominance affect the dollar?

The US midterm elections are also scheduled for November 3rd.

In this election, a Democratic victory in the House of Representatives is considered almost certain, and there is a view that the Democrats are also dominant in the Senate.

Let me explain a little bit about the midterm elections here.

The US midterm elections are congressional elections held in the middle of a president’s term.

Depending on whether the Congress becomes one where it is easy to advance the president’s policies or one where opposition forces become stronger, it will also affect future US politics.

For example, there is a possibility that the economic policies, tax systems, and budget proposals the president wants to advance will become difficult to pass in Congress.

Therefore, investors are paying attention not only to the election results but also to future political management.

Regarding this election, since Democratic dominance is expected to some extent, it seems that part of it is already priced into the market.

Therefore, it is not necessarily the case that the dollar-yen pair will move significantly just because of the election results.

However, if the results are different from expectations, there is a possibility that the market will react significantly.

You never know what will happen in an election until the results are out.

You can’t let your guard down with exchange rates or politics until the very end (lol).

6. UK policy interest rate announcement! Focus on the pound too!

On November 5th, there will be a Bank of England (BOE) monetary policy meeting.

This will be an important event as the quarterly inflation report and the governor’s press conference are also scheduled.

It is what is called “Super Thursday.”

A rate hike is priced into the market, and the possibility that a financial tightening stance will be maintained in the future is being recognized.

A rate hike is raising the policy interest rate, just like in Australia earlier.

When interest rates become high, the appeal of holding the pound increases, which could lead to pound buying.

Therefore, the pound is considered to have a market environment where it is easier to be bought compared to the euro.

However, what I want to be careful about here too is future monetary policy.

What the market is focusing on is not just whether they will raise rates this time.

Will they continue to raise rates in the future, or will this time be the last?

The market could also change significantly depending on the governor’s remarks.

In this outlook,

The pound-dollar pair is expected to move mainly around the high 1.33 dollar range.

The pound-yen pair is recognized as having heavy upside resistance in the low 211 yen range.

While the pound has buying factors in terms of interest rates, dollar buying and yen buying due to the Middle East situation could also suppress the upside.

In other words, it is a state where tailwinds and headwinds are blowing on the pound at the same time.

7. US employment report! One of the biggest focus events of the week!

And on November 6th, it’s the US employment report.

If you are doing FX, haven’t you heard of it at least once?

The US employment report is an important economic indicator for checking the US employment situation.

What is particularly focused on is the non-farm payrolls.

Simply put, it is a number that shows how much employment has increased in sectors other than agriculture.

In this forecast, employment growth is expected to be slightly stronger than last time.

If the result is in line with market expectations, the view that the US employment market is still solid is likely to strengthen.

So, what happens to the dollar if employment is strong?

Generally, if employment is strong, the solidity of the US economy is recognized.

If the economy is strong, it can lead to the view that the Fed does not need to rush to cut interest rates.

If it is expected that high interest rates will continue, it could lead to dollar buying.

Conversely, if employment falls significantly below expectations, it could lead to dollar selling due to caution about an economic slowdown and expectations of interest rate cuts.

However, other numbers in the employment report, such as the unemployment rate and average hourly earnings, are also important.

It is dangerous to judge based on just one number.

Immediately after the announcement, it can move significantly in an instant.

Those who have positions, let’s re-check your margin and lot size.

I understand the desire to make a profit, but I want to value defense especially when the market is rough♪

8. Is the euro’s upside heavy? Also be careful of France’s fiscal problems!

Next is about the euro.

A factor suppressing the euro’s upside this time is France’s fiscal problems.

On October 30th, the rating agency Fitch downgraded France’s rating outlook to “negative.”

A rating is an evaluation of whether a country or company can properly repay the money it has borrowed.

If the outlook becomes negative, it means that caution regarding future creditworthiness is intensifying.

France is a major country in the eurozone.

If France’s fiscal situation is viewed with anxiety, it could lead to investor caution regarding the euro as a whole.

Furthermore, dollar buying due to the Middle East situation is also likely to be a weight on the euro-dollar pair.

In this outlook, a development testing the 1.1100 dollar level is being recognized for the euro-dollar pair.

Also, regarding the euro-yen pair, yen buying due to risk aversion is a weight, and the possibility of falling below 175 yen is being recognized.

The euro has quite difficult factors, namely fiscal problems and geopolitical risk.

9. What will happen to the dollar-yen pair today? A development where a clear sense of direction is difficult to emerge

If we organize the factors so far, a development where it is difficult for the dollar-yen pair to have a sense of direction is expected this week.

As factors for dollar buying,

・Dollar demand due to global risk aversion.
・Expectations for the solidity of the US employment market.
・The view that US interest rates will be maintained at a high level.

On the other hand, as factors for yen buying,

・A sharp drop in high-tech stocks.
・Risk aversion due to the intensification of the Middle East situation.
・Caution regarding global stock price declines.

Like this, there are buying factors for both the dollar and the yen.

Therefore, rather than leaning significantly toward one or the other, it is possible that it will move while swinging up and down.

Furthermore, this week, important events such as Australia’s policy interest rate, the US midterm elections, the UK’s policy interest rate, and the US employment report will continue.

Investors waiting and seeing before events are also likely to increase, and it is conceivable that the market will become difficult to move in one direction.

However, depending on the results of important events or sudden changes in the Middle East situation, there is also a possibility that it will move more significantly than expected.

“It looks like it will be a range market, so I’m safe♪”

That way of thinking is forbidden.

You think it’s a range market, and then it suddenly moves significantly.

In foreign exchange, such things are not rare.

10. What FX Mama wants to value! This week, fund management over profit♪

Now, from here on, I would like to talk about the mindset that FX Mama values.

When important events are concentrated like they are this week, you inevitably end up worrying about the market, don’t you?

“Will it go up today?”
“Will it go down from here?”
“Should I buy now while I can?”

I think you might have feelings like that.

However, what is important for continuing in FX for a long time is not to predict every single market move perfectly.

What is important is to continue trading that suits your own capital.

What FX Mama always tells you is,

Rather than rushing for profit, first of all, do not get kicked out of the market.

I think this is truly important.

For example, if you are trading with 100,000 yen in capital, trade with a lot size that fits 100,000 yen.

Just because your capital has increased, there is no need to suddenly change to a large lot size.

Little by little, steadily.

It is important to trade within a range that you can manage without strain.

Also, in an event-driven market like this week, there is a possibility that price movements will be rougher than usual.

Even for a position you thought was fine under normal circumstances, unrealized losses can become large due to sudden fluctuations.

That is precisely why I want to keep a margin of safety in my account balance.

Especially for those who incorporate averaging down, you need to think about capital management from the start, assuming you will hold additional positions.

Averaging down is a method of adding positions when the price moves against you, but if the market moves significantly in one direction, unrealized losses will also swell.

Even for currency pairs that earn swap points, you cannot resolve unrealized losses with swaps alone.

During a sudden drop, there are times when the price movement is not as usual.

That is why capital management with a buffer is necessary.

FX is not a game where you have to make a profit every day.

If there is no chance, wait.

Do not make unreasonable trades.

Follow the rules you have decided for yourself.

I think continuing to do this calmly is an important point for having a long-term relationship with FX.

Just because the market is moving, it does not mean you must participate.

Taking a break is also a great choice♪

Even with housework and childcare, if you keep trying your best every day, you will get tired, right? (laughs)

FX is the same.

Let’s not try too hard and value our own pace!

⑪ Summary! Let’s watch the market carefully for the first week of November♪

Finally, I will organize the points of interest starting today.

First, for the dollar-yen, dollar buying and yen buying are intersecting, and a development where it is difficult to see a clear direction is expected.

At the end of last week, it fell to the 156 yen level and then recovered to the mid-157 yen level, but caution regarding the decline in high-tech stocks and the situation in the Middle East still requires attention.

And this week,

・November 3: Australia’s policy interest rate announcement
・November 3: US midterm elections
・November 5: UK monetary policy announcement
・November 6: US employment statistics

Important events are lined up.

While there are expectations for interest rate hikes for the Australian dollar and expectations for monetary tightening for the pound, France’s fiscal problems are weighing on the euro.

I want to pay attention not only to the dollar-yen but also to the movements of each currency pair.

However, precisely because there are many events this week, caution against unexpected price movements is also necessary.

As FX Mama, I would like to be calm, not greedy, and thoroughly manage my capital more than ever during a week like this.

The market will not run away.

Even if you don’t trade today, the market will be there tomorrow and the day after.

It is meaningless to chase short-term profits and lose precious capital.

Steadily and calmly♪

Let’s follow the rules and continue trading that suits our own capital!

I hope this week will also be a calm and good trading week for everyone ٩( ᐛ )و♪