The curve shifted to a bear-steepening dynamic | 25 Agustus 2023

25 Agustus 2023, USD/JPY

The curve shifted to a bear-steepening dynamic

USDJPY trading plan:

The U.S. yield curve comparing two-year with 10-year yields has been inverted on a continued basis for over a year, a reliable sign of a looming recession, but it has steepened in recent weeks because 10-year yields have been rising while shorter-dated ones have remained flat. The so-called "bear steepening" suggests that the market expects high interest rates to no longer hurt the economy, with investors extending their horizon for how long the Fed will maintain its restrictive policy stance. Investors tend to become frustrated when largely anticipated recessions fail to materialize as the Fed approaches the end of its hiking campaigns, "so bond markets push the tightening aggressively down the curve right when the economy is slowing - a dangerous cocktail

Investment idea: buy 145.75 and take profit 146.45.

David Johnson
Analyst of «FreshForex» company
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