USD/JPY holds around 128.00 despite DXY weakening, US PMI in focus

• USD/JPY is hovering around 128.00 as the focus shifts to the US PMI data.
• A positive market mood has underpinned the risk-perceived currencies.
• Investors are keeping an eye on the US PMI data, which is due on Tuesday.

The USD/JPY pair is attempting to overstep 128.00 despite the underperformance from the US dollar index (DXY) displayed in the Asian session. The pair have been struggling to surpass Monday’s high and is likely to remain volatile as a firmer rebound in the positive market sentiment will demand more strength from the market participants.

An unexpected rise in Japan’s Consumer Price Index (CP) numbers released last week is expected to bring a potential shift in the ideology of the Bank of Japan (BOJ) on the policy structure. The Statistics Bureau of Japan reported annual Japan’s National Consumer Price Index (CPI) figure at 2.5%, significantly higher than the estimates of 1.5% and the prior print of 1.2%. Meanwhile, the core CPI that excludes food and energy prices has turned positive to 0.8% than the forecast of -0.9% and the former print of -0.7%.

A sudden rise in Japan’s inflation is not going to support a rate hike alternative as the inflation is still near the targeted levels however, the BOJ could reduce its stimulus packages, which the BOJ was using to spurt the aggregate demand in its zone earlier.

Meanwhile, the US dollar index (DXY) is losing its strength after facing hurdles at 105.00. The DXY has surrendered more than 2% and is expected to lose more amid the soaring market mood. Going forward, investors will keep the US Purchase Managers Index (PMI) on the radar.  The S&P Composite PMI is seen at 55.5 against the prior print of 56. While the preliminary estimate for the Manufacturing and Services PMI is 58 and 55.3 against the former figures of 59.2 and 55.6 respectively.