Hello, this is Tombo.
The currency market saw significant price movements again this week.
The Fed implemented a rate hike at the FOMC. Following that, the Bank of Japan also raised rates, but USD/JPY rose to the 158 yen level at one point.
“Even though the BOJ raised rates, why didn’t the yen strengthen?”
Many of you may have felt that way.
Furthermore, over the weekend, new geopolitical risks surrounding Saudi Arabia emerged.
Although the market is closed, we need to be cautious about crude oil prices, stock futures, and gap openings in exchange rates on Monday morning.
This time, I will organize the points to check at the start of the week as clearly as possible.
First, the conclusion
Monday morning is a market where I want to wait until the first one-hour candle is confirmed before trading.
In particular, I want to check the following five items:
1. Brent and WTI crude oil
2. US stock and Nikkei futures
3. Gold
4. Copper prices
5. USD/JPY and AUD/USD
If crude oil rises significantly following the weekend news, it could lead to lower stock prices and inflation concerns, potentially causing the dollar and yen to be bought.
On the other hand, if it is confirmed that the damage is limited and US-China talks progress positively, there is a possibility that copper, Chinese stocks, and the Australian dollar will be bought.
On Monday morning, it is important not to decide on a direction based solely on expectations.
What happened over the weekend
The Houthis announced that they had attacked Riyadh, the capital of Saudi Arabia, and Yanbu, a key crude oil export hub.
Flames and thick black smoke have been confirmed near Riyadh airport.
Meanwhile, there has been no official confirmation from the Saudi government regarding the attack on the Saudi Aramco facility in Yanbu or the actual damage.
We need to separate facts from speculation here.
What has been confirmed
* Flames and black smoke confirmed around Riyadh airport
* The Houthis announced an attack on Riyadh
* The Houthis claim to have also attacked facilities in Yanbu
* Saudi authorities issued a safety declaration after the alarm
* The damage situation in Yanbu has not been officially confirmed
Reuters “Flames and black smoke near Riyadh airport, Houthis claim attack” Original text
Japanese summary: The Houthis announced that they attacked Riyadh and Yanbu with missiles and drones. While the full extent of the damage has not been confirmed, anxiety over crude oil transport is rising again.
Why does the Saudi situation move the exchange rate?
The basic flow is as follows:
Deterioration of the Saudi situation
↓
Anxiety that crude oil supply will decrease
↓
Crude oil prices rise
↓
Alert that prices will rise again
↓
Government bond yields tend to rise
↓
Headwinds for stock prices
↓
The dollar and yen, considered safe assets, tend to be bought
Crude oil affects various prices, such as gasoline costs, electricity bills, and product transportation costs.
When crude oil prices rise, the market thinks, “Will inflation become strong again?”
Then, the view that central banks will keep interest rates high strengthens, making government bond yields more likely to rise.
While rising interest rates support the dollar, they are a burden on the stock market.
Why USD/JPY is the most difficult
Usually, when anxiety such as war or falling stock prices intensifies, the yen tends to be bought as a safe asset.
However, Japan is a country that imports crude oil from overseas.
When crude oil prices rise, the money paid overseas increases, which is a negative factor for Japan’s trade balance. This could lead to a weaker yen.
In other words, for the yen this time, there are:
* Yen buying due to risk aversion
* Yen selling due to the burden of crude oil imports
* Yen buying due to expectations of additional BOJ rate hikes
* Yen selling due to the US-Japan interest rate differential
These opposing factors exist simultaneously.
Therefore, USD/JPY is in the state where it is most difficult to judge the direction among the five currencies.
It is better not to simply assume “yen buying because of geopolitical risk.”
Exchange rates as of the weekend
As of the close of the New York market on September 18, the levels were as follows:
* USD/JPY: 156.84 yen
* EUR/JPY: approx. 180.16 yen
* AUD/JPY: approx. 111.78 yen
* EUR/USD: 1.1486 dollars
* AUD/USD: 0.7126 dollars
* Dollar Index: 100.21
The currency strength on Friday was:
AUD > EUR > USD > JPY
However, this is the price movement before reflecting the Saudi situation over the weekend.
Considering the weekend materials, there is a possibility that the dollar and yen will start strong, while the euro and Australian dollar start weak on Monday.
Interest rate differentials favor the dollar
The main interest rate differentials as of September 18 are as follows:
* US 2Y – Japan 2Y: 2.910%
* US 10Y – Japan 10Y: 2.015%
* US 2Y – Germany 2Y: 1.501%
* US 2Y – Australia 2Y: minus 0.252%
Compared to the previous day:
* US 2Y – Japan 2Y widened by 9.4bp
* US 10Y – Japan 10Y widened by 7.4bp
* US 2Y – Germany 2Y widened by 3.1bp
* Australia’s 2Y interest rate advantage narrowed by 5.4bp
1bp is 0.01%.
Looking only at interest rate differentials, the combinations are:
* USD/JPY is likely to rise
* EUR/USD is likely to fall
* AUD/USD is likely to fall
However, on Monday morning, crude oil and geopolitical risks may be reflected before interest rate differentials.
US-China talks also scheduled for Sunday
US Treasury Secretary Bessent and Chinese Vice Premier He Lifeng are scheduled to meet from 23:30 Japan time on September 20.
Topics such as AI security, trade, and economic issues will be discussed.
If the talks progress, it could lead to:
* A rise in Chinese stocks
* A rise in copper prices
* A rise in the Australian dollar
Conversely, if there are no notable results, the Australian dollar’s upside is likely to be heavy due to anxiety over the Chinese economy.
Reuters “US Treasury Secretary Bessent and Vice Premier He Lifeng to meet on Sunday” Original text
Japanese summary: The meeting will discuss trade, AI security, etc. It may serve as groundwork for future US-China summit talks.
Five-currency judgment for the start of the week
USD/JPY
Wait and see for now.
The US-advantaged interest rate differential is a factor for USD/JPY to rise, but there is also caution regarding currency intervention by authorities and yen buying due to risk aversion.
Even if it rises, I will not chase the highs and will confirm Monday’s price movement.
AUD/JPY
Leaning toward selling from wait-and-see.
If there is a global stock market decline, it will be a headwind for the Australian dollar, but the yen is also a currency weak against high crude oil prices. It is a difficult combination to judge at this moment which will be weaker, the Australian dollar or the yen.
EUR/JPY
Leaning toward selling on rallies.
The euro is susceptible to the energy import burden caused by high crude oil prices, and if the yen is bought due to risk aversion, it will be easy for it to fall.
However, since the yen itself is also negatively affected by high crude oil prices, I will avoid chasing the lows.
EUR/USD
Leaning toward selling on rallies.
The US-German 2Y interest rate differential is widening in a direction favorable to the dollar. High crude oil prices are also a burden on Europe, an energy-importing region.
Fundamentals and the medium-term price direction are relatively aligned.
AUD/USD
Conditional selling.
Weakness remains in China’s domestic demand, and the US-Australia interest rate differential is also moving in a direction unfavorable to the Australian dollar.
On the other hand, if US-China talks progress and copper and Chinese stocks rise, I will hold off on selling.
Monitoring candidates for the start of the week
Since the market is closed, this is not a time to trade immediately.
After the first one-hour candle on Monday is confirmed, I will monitor the following two:
Selling EUR/USD on rallies
* Friday closing price: 1.1486
* Monitoring price range: 1.1495–1.1520
* Stop-loss candidate: Above 1.1550
* Profit-taking candidate: 1.1435, then 1.1390
* Assumed risk-reward: approx. 1 to 2
I will consider it only if high crude oil prices, lower European stocks, and rising US interest rates overlap and the one-hour candle turns downward in the monitoring price range.
If it starts with a large gap opening below 1.1450, I will avoid chasing the lows and pass.
Selling AUD/USD on rallies
* Friday closing price: 0.7126
* Monitoring price range: 0.7135–0.7160
* Stop-loss candidate: Above 0.7185
* Profit-taking candidate: 0.7070, then 0.7025
* Assumed risk-reward: approx. 1 to 2
I will consider it if copper and Chinese stocks do not rise even after the announcement of China’s LPR, and the one-hour candle turns downward.
If progress in US-China talks, higher copper, and higher Chinese stocks align, I will withdraw the selling scenario.
Note that both of these are effectively “buying US dollars.”
Even if they look like separate currency pairs, holding both at the same time overlaps risks in the same direction. It is safer to narrow it down to only one where the conditions are clear.
Summary
At the start of the week, it is important not to look only at currency charts, but to check crude oil, stock futures, gold, and copper together.
Points I want to pay special attention to are:
* Whether damage to Saudi-related facilities is confirmed
* Whether crude oil prices rise significantly
* Whether stock futures fall
* Whether US-China talks progress positively
* Whether copper and the Australian dollar move in the same direction
Just because big news came out over the weekend does not mean you need to jump in immediately at the start of Monday.
Immediately after a gap opening, spreads tend to widen and price movements tend to become unstable.
First, confirm the market’s reaction.
After that, once the first one-hour candle is confirmed, choose only currencies where the fundamentals and chart direction are aligned.
This is the basic policy for the start of the week.
Thank you for reading until the end.
At the start of the week, do you think “dollar buying” due to high crude oil prices or “yen buying” due to risk aversion will be stronger?
※ This article is intended for market analysis and does not recommend or guarantee trading. Before placing actual orders, please check the latest prices, daily/4-hour/1-hour candles, EMA, and spreads at the FX company you use.
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