The rise in US inflation is negative for the dollar | 15 September 2020

15 September 2020, USD/JPY

The rise in US inflation is negative for the dollar

USDJPY trading plan:

The rise in US inflation is negative for the dollar. The yield on short-term US Treasury bonds is within the range of the Federal Reserve discount rate of 0-0.25%, and with the growth of inflation, the negative real yield increases. For example, last month inflation was at 1%, and the yield on annual bonds was 0.11%. This resulted in a negative real yield of 0.89%. Now inflation is 1.3%, and the yield on bonds is 0.13% - the negative yield has increased and is 1.17%. Investors need positive real profitability, they want to earn, but in American bonds this will not be possible, which contribute to a decrease in the dollar exchange rate.

Trading recommendation: Sell 105.80 and take profit 105.40.

David Johnson
Analyst of «FreshForex» company
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