USD/JPY displays exhaustion signals around 133.50, US Michigan CSI eyed

• USD/JPY is sensing exhaustion signals after hitting a high of 133.50.
• The impact of lower US CPI has faded away and hawkish Fed bets are hogging the limelight.
• The US Michigan CSI is expected to improve to 52.2 from the prior release of 51.5.

The USD/JPY pair has slipped minutely after printing an intraday high of 133.50. On a broader note, the asset has displayed a pullback move after a perpendicular fall on Wednesday. Now, the pullback move is likely to get exhausted amid the unavailability of a potential trigger.

The US dollar index (DXY) is declining gradually but is managing to sustain above the crucial hurdle of 105.00. After a massive decline on the softer release of the US Consumer Price Index (CPI), investors are shifting their focus again on the likely hawkish stance of the Federal Reserve (Fed) in the September monetary policy meeting.

Markets cheered the downward shift in the US Consumer Price Index (CPI), which landed at 8.5% lower than the expectations of 8.7% and the prior release of 9.1%. A one-time slowdown in the US inflation is not sufficient to have a ball as price pressures are still extremely deviated from the desired levels. Therefore, the Fed will continue on its path of accelerating interest rates. For the record, the extent of hawkish guidance will trim abruptly.

In today’s session, the entire focus will remain on the US Michigan Consumer Sentiment Index (CSI). The data is likely to improve to 52.2 from the prior release of 51.5.

On the Tokyo front, the ongoing cabinet reshuffle is expected to result in a dramatic change in the situation of the Japanese yen on a broader basis. Finance Minister Shunichi Suzuki said that Japan’s financial position is still severe. He added that “it's critical to continue reacting to covid and inflation.”