USD/JPY tumbles to near 135.00 as DXY extends losses, Fed minutes and US ISM eyed

• USD/JPY has slipped sharply to near 135.10 as the DXY has displayed a subdued performance.
• Accelerating odds of a higher inflation rate in Japan is bolstering the yen bulls.
• In today’s session, FOMC minutes and US ISM Services data will remain in focus.

The USD/JPY pair has witnessed a steep fall after surrendering the crucial support of 135.53 in the Asian session. The asset has tumbled to near 135.14 as the US dollar index (DXY) has extended its correction after violating 106.46.

A bumpy ride is expected in the asset as the DXY may correct further ahead of the Federal Open Market Committee (FOMC) minutes on Wednesday. The minutes of the June monetary policy meeting will unfold the ideology behind announcing a 75 basis point (bps) rate hike by the Federal Reserve (Fed). In addition to that, the minutes will display the situation of the macroeconomic indicators, which will portray the current condition of the US economy.

Apart from the FOMC minutes, investors will keep an eye on the US ISM Services data. A mixed performance is expected from the market participants as preliminary estimates for Services Price Paid and New Orders Index are high while for Services PMI and Employment Index are low. The crucial Services PMI is seen at 54.5, lower than the former release of 55.9.

On the Tokyo front, yen bulls have strengthened on rising expectations for higher price pressures. Seisaku Kameda, a former chief economist at the Bank of Japan (BOJ) said that the sharp decline in yen on a broader note will lift the inflation outlook. The inflation rate may remain well above 2% this year.