The Fed is rightfully concerned | 21 3月 2022

21 3月 2022, USD/JPY

USDJPY trading plan:

The Fed is rightfully concerned about the nefarious effects of inflation on the consumer. Rising prices put a squeeze on discretionary spending and real wages. Additionally, businesses must cope with rising input costs, a challenge for firms protecting profit margins and also market share. In response to these challenges of rising input prices, some suppliers find product downsizing less offensive to customers than outright price increases. Product downsizing – or shrinkflation – is often the preferred choice for manufacturers in highly competitive markets where individual firms do not have pricing power. Rather than risk losing market share or risk retooling the input process, firms shrink the package and deliver less product to the consumer. So, expect to get more air and less chips next time you buy a snack. This scenario is likely when the economy is experiencing cost-push inflation which is described below. Now, the median dot of the Committee, in aggregate, reflects seven interest rate hikes in 2022, bringing the policy rate up to 1.9%. This is a positive signal for the dollar.

Investment idea: buy 118.78 and take profit 119.44.

David Johnson
Analyst of «FreshForex» company
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