USD/JPY steadies around 135.00, upside remains favored ahead of Japan Inflation

• USD/JPY is juggling marginally below 135.00 as investors await Japan's Inflation.
• A divergence is expected in the plain-vanilla CPI and Core CPI figures.
• The DXY is trading lackluster as the focus shifts to the US Durable Goods Orders.

The USD/JPY pair is displaying a lackluster performance in the early Asian session after sensing a decent rebound from a low of 134.27. The asset is oscillating in a 9-pips range near the critical hurdle of 135.00. A range-bound movement is expected to sustain for a minor period only as the Statistics Bureau of Japan is going to release the Consumer Price Index (CPI) at 11:30 GMT.

A preliminary estimate for the annual Japan inflation figure is 2.9%, higher than the prior print of 2.5%. If the core CPI that excludes food and oil prices is considered, a slippage to 0.4% is expected from the prior print of 0.8%. The FX domain is aware of the fact that the ongoing war between Russia and Ukraine and supply chain bottlenecks have resulted in soaring fossil fuels and food prices. The composite CPI figure is expected to extend further while the core CPI is seeing a slippage, which indicates that the composite figure is majorly being guided by the oil and food prices.

The Japanese economy is still facing the headwinds of lower aggregate demand. A higher spending situation on costly oil and food prices has actually reduced the demand for other durable and non-durable products. The huge divergence in plain vanilla CPI and core CPI is responsible for the dovish commentary from Bank of Japan (BOJ) policymakers in the June monetary policy meeting minutes released this week.

On the dollar front, the US dollar index (DXY) has turned sideways as investors are awaiting the release of the US Durable Goods, which are due on Monday. An improvement is expected in the economic data to 0.6% from the former figure of 0.5%.