19 January 2022, USD/JPY
USDJPY trading plan:
The Federal Reserve begins unwinding its extraordinary pandemic-era stimulus. The Fed is preparing to hike interest rate as soon as March, with three or four increases expected this year, which will lift yields on very short-term bills that remain near historic lows. The Fed’s last tightening cycle from 2015 to 2019 ended with large funding stresses as demand for overnight loans from companies, banks and other borrowers overwhelmed supply when the Fed reduced its balance sheet. A repeat of such a cash crunch this time is seen as less likely since the Fed last year established a permanent backstop to the market in the form of a Standing Repo Facility. However, any uptick in demand for this facility may be a warning signal. This is a positive signal for the dollar.
Investment idea: buy 114.04 and take profit 114.70.
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