05 July 2021, USD/JPY
USDJPY trading plan:
The U.S. Treasury needs to run down its cash balance in the Treasury General Account deposited at the Fed to a $450 billion target before a two-year debt ceiling suspension expires on July 31. As of June 29, the Treasury has a cash balance of $711 billion. A Treasury General Account reduction increases reserves in the banking system. The Federal Reserve is continuing to print money and increasing the dollar liquidity surplus. Bankers now have a lot of capital; they don't know what to do with it. The Federal Reserve is continuing to print money and increasing the dollar liquidity surplus. Bankers now have a lot of capital, they don't know what to do with it. Against this background, bankers are involved in reverse repo transactions with the Fed. Such operations are carried out only during periods of excess liquidity. If at the beginning of the year the volumes in such operations were at the level of $ 50-100 billion per day, then at the beginning of July it rose to $800 billion. This is a negative signal for the dollar.
Investment idea: sell 111.33 and take profit 110.95.
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