Quantitative tightening | 11 Enero 2022

11 Enero 2022, USD/JPY

USDJPY trading plan:

The Federal Reserve is ready to cut back its holdings of more than $8 trillion of bonds. The Fed first started using large-scale asset purchases - also called quantitative easing, or QE - during the 2007-2009 financial crisis. The central bank finally started the shrinkage in 2018, allowing a certain number of bonds to mature each month without the repaid principal being reinvested in new securities, a process that became known as quantitative tightening, or QT. About $650 billion of bonds had rolled off the Fed's portfolio by September 2019 when it was forced to abruptly stop QT after a key short-term credit market went haywire and it became evident that too much money had been drained from the system. The Fed had amassed roughly $8.3 trillion of bonds, and the yield on the 10-year U.S. Treasury note, influential for rates on everything from car loans to home mortgages, had fallen from above 4% to well below 1.7%. The reduction of dollar liquidity will have a positive impact on the exchange rate of the U.S. currency.

Investment idea: buy 115.09 and take profit 115.62.

David Johnson
Analyst of «FreshForex» company
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