- USD/JPY is gearing up for a fresh bullish impulsive wave despite lower consensus for US CPI.
- The outstanding US NFP has infused fresh blood in Fed policymakers’ confidence.
- BOJ’s ultra-loose monetary policy will keep the yen bulls on a bumpy ride.
The USD/JPY pair has turned sideways in the Asian session following the footprints of the US dollar index (DXY). On a broader note, the asset is displaying back and forth moves after a juggernaut rebound from 133.00 on Friday.
The greenback bulls were driving the asset higher like there is no tomorrow after the release of the bumper US employment data. The US Nonfarm Payrolls (NFP) landed at 528k, significantly higher than the expectations of 250k and the prior release of 372k. Despite the headwinds of a halt in the recruitment process by US corporate and lower investments due to rising interest rates by the Federal Reserve (Fed), the employment data has remained upbeat and may support the Fed.
Now, the entire focus is shifting toward the US Consumer Price Index (CPI) data, which will release on Friday. A downside print is expected to be 8.7% from the former release of 9.1% on an annual basis. The US households were facing severe pressure from the higher price rise index. Thanks to the weaker oil prices in July, which is resulting in a steep fall in the US inflation data. However, this may not trim the extent of policy tightening measures by the Fed in September.
On the Tokyo front, the continuation of an ultra-loose monetary policy by the Bank of Japan (BOJ) will keep haunting the yen bulls. The BOJ is committed to spurting the growth rate and lifting that to the pre-pandemic levels as early as possible. Therefore, it is critical to pump much liquidity into the economy so that the investments could ramp up the wage price index and the inflation will remain above 2%.