USD/JPY finds support near 139.00 as USD Index recovers, US CPI in spotlight

• USD/JPY has found intermediate support near 139.00, following the footprints of the USD Index.
• A volatile action in the USD Index cannot be ruled out as investors are preparing for US inflation.
• The street is anticipating that there would no alteration in BoJ’s current ultra-dovish stance.

The USD/JPY pair has witnessed decent buying interest after a vertical drop to near 139.00 in the early New York session. A supportive move for the USD/JPY pair is backed by a recovery in the US Dollar Index (DXY). The price action in the USD Index indicates that USD Index bulls are not going to surrender their entire gains easily as investors are shifting their focus toward the United States Consumer Price Index (CPI) data, which will release on Tuesday.

S&P500 futures have added more gains in early America amid solid hopes of a neutral interest rate policy by the Federal Reserve (Fed). As US factory activity is consistently contracting straight for the past seven months and the service sector is hardly showing any expansion and labor market conditions have also started easing, Fed policymakers would at least discuss pausing the policy-tightening spell extensively.

The US Dollar Index has witnessed a dynamic recovery to near 103.45. A volatile action in the USD Index cannot be ruled out as investors are preparing for the US inflation as the assessment of 19-month high weekly Initial Jobless Claims looks done.

Considering the recent fall in the oil price, headline inflation is expected to continue its softening spell, however, the core CPI could show persistence as services are getting costly. Investors should note that two-thirds of US economic activities are contributed by the service sector.

On the Japanese Yen front, the focus of investors will remain on the interest rate decision by the Bank of Japan (BoJ), which will be announced next week. The street is anticipating that there would no alteration in the current ultra-dovish stance as BoJ Governor Kazuo Ueda has been constantly discussing the need for monetary stimulus for elevating wages and households demand.