USD/JPY establishes above 135.00 as DXY strengthens ahead of US Inflation

• USD/JPY is witnessing a balanced profile above 135.00 as pre-inflation anxiety hit risk-impulse.
• The plain-vanilla US CPI may slip to 8.7% whereas the core CPI is expected to advance to 6.1%.
• Japan’s cabinets re-shuffle to keep the yen bulls on the tenterhooks.

The USD/JPY pair is walking northwards briskly to recapture its two-week high at 135.58 in the Asian session. The asset has turned positive after finding significant bids around 134.50 on Monday. The two-day consolidated movement in the USD/JPY pair clearly indicates that the market participants are awaiting the release of the US Consumer Price Index (CPI) having sky-rocketing anxiety.

This time, the event of the US inflation release holds significant importance as investors are betting on a downward shift in the price pressures. The investing community is aware of the fact that the Russia-Ukraine tussle escalated the oil prices abruptly, which remained critical to higher cost pressures in the global economy.

The black gold has remained vulnerable in July and a more than 11% decline in oil prices has trimmed the inflation forecasts. As per the market consensus, the inflation rate will skid to 8.7% from the prior release of 9.1%. However, the core CPI that doesn’t inculcate oil and food products in the calculation is seen higher at 6.1% vs. 5.9% released earlier. Well, it looks like the demand for durable goods is rebounding sharply.  Meanwhile, the US dollar index (DXY) is aiming to cross the immediate hurdle of 106.40.

On the Tokyo front, the yen bulls are dancing to the tunes of Japan’s cabinet re-shuffle. Japanese Prime Minister Fumio Kishida is set to retain Finance Minister Shunichi Suzuki in a cabinet reshuffle this week. Now, eyes will remain on measures to be taken by the Japanese administration to step up the labor cost index, which is critical to keep the inflation rate above 2%.