USD/JPY attempts to sustain above 135.00 as focus shifts to Fed minutes

• USD/JPY is attempting to balance above 135.00 as the DXY is holding itself above 105.00.
• Fed’s policy tightening measures will cut the growth prospects and job additions.
• BOJ’s ultra-loose monetary policy has weakened the yen bulls.

The USD/JPY pair has remained subdued in the Asian session, following the footprints of the US dollar index (DXY). The major slipped lower at the open to the crucial support of 134.78, however, the asset rebounded firmly and is now attempting to sustain above the round-level support of 134.78.

The DXY has turned sideways after sensing bids below the psychological support of 105.00. Also, the market participants are awaiting the release of the Federal Open Market Committee (FOMC) minutes. A modest rebound after a sheer downside move doesn’t resemble a bullish reversal. For the same, the asset needs more meaningful filters. Friday’s sell-off in the DXY is backed by the vulnerable performance of the US Institute of Supply Management (ISM).

The US ISM Manufacturing PMI landed at 53, lower than the expectations and the prior print of 54.9 and 56.1 respectively. Apart from that, the Employment Index and New Orders Index displayed a vulnerable performance. The downbeat economic data trimmed the odds of a bumper rate hike announcement by the Federal Reserve (Fed).

Traders should be aware of the fact that the catalysts behind Fed’s confidence in announcing extreme policy tightening measures were strong growth prospects and a tight labor market. Now, the overall demand and employment numbers will be affected by the Fed’s tightening measures. For more clarity, the consensus for the US Nonfarm Payrolls (NFP) has cut significantly to 250k from the prior print of 390k.

On the Tokyo front, the continuation of an ultra-loose monetary policy will weigh pressure on the yen bulls as other nations are suiting up for more rate hike announcements this month. The economy is facing the headwinds of soaring oil and food prices, which have elevated their plain-vanilla inflation rate but not the core Consumer Price Index (CPI).