USD/JPY finds immediate cushion around 129.00 as risk-on profile eases

• USD/JPY has gauged intermediate support around 129.00 after a vertical fall.
• Ease in risk-on market mood has provided support to the US Treasury yields.
• A downtrend in the US inflation has accelerated the odds of less hawkish monetary policy by the Fed.

The USD/JPY pair has sensed support around 129.00 in the Tokyo session after a vertical downfall below the critical support of 132.30 on Thursday. The asset witnessed extreme selling pressure after the continuation of the downward spree of the United States inflation.

After a massive selloff, the asset has gauged an intermediate cushion as the risk-sensitive asset has sensed long liquidation. The S&P500 futures have picked offers in Asia after a three-day consecutive rally, portraying a loss of strength in the risk-appetite theme. This has led to a decline in the demand for US government bonds. The 10-year US Treasury yields have gained to near 3.49%.

Meanwhile, the US Dollar Index (DXY) is attempting to overstep the immediate resistance of 102.00. A rebound move in the USD Index has been supported by the ease in the cheerful market mood. However, the downside bias for the USD Index is still solid as the headline US inflation has dropped to 6.5% from its peak of 9.1% in a few months.

A meaningful downtrend in the US Consumer Price Index (CPI) has triggered odds of less-hawkish commentary by Federal Reserve (Fed) chair Jerome Powell in the upcoming monetary policy meeting. While other Fed policymakers have trimmed their expectations for the continuation of a higher interest rate announcement. Philadelphia Fed Bank President Patrick Harker said on Thursday that it was time for future Fed rate hikes to shift to 25 basis points (bps) increments, as reported by Reuters.

On the Tokyo front, the Bank of Japan (BoJ) has announced that it will review the side effects of a secular period-long ultra-expansionary monetary policy. This doesn’t convey that the central bank will start turning hawkish on interest rates as the maintenance of the 2% inflation target is still difficult for the BoJ. However, the central bank will restrict sheer liquidity leakage to improve market functioning.