USD/JPY faces barricades around 137.40, upside remains favored ahead of US PMI

• USD/JPY is likely to overstep the immediate hurdle of 137.40 amid upbeat DXY.
• Soaring expectations of the Fed’s continuation on a path of interest rate elevation are strengthening the DXY.
• Also, investors have underpinned the greenback against the yen on downbeat Japan PMI data.

The USD/JPY pair is struggling to overstep the immediate hurdle of 137.40 after a decent bounce from 137.20. The upside bias in the asset is still favored as the US dollar index (DXY) is expected to recapture the 19-year high of 109.30 sooner.

As investors are turning risk-averse ahead of the Jackson Hole Economic Symposium and on downbeat PMI performances by various nations, investors are shifting their funds into the US dollar index (DXY). The DXY is advancing sharply higher as a hawkish tone by the Federal Reserve (Fed) will stay for longer despite little evidence of exhaustion in the price pressures.

No doubt, the annual plain-vanilla US Consumer Price Index (CPI) slipped to 8.5% after hitting a figure above 9%. The Fed will continue its path of hiking interest rates as the current inflation rate is extremely far from the desired rate of 2%. Therefore, Fed chair Jerome Powell will continue its hawkish tone at Jackson Hole Economic Symposium this week.

On the economic data front, investors are awaiting the US Purchasing Managers Index (PMI) numbers, which are expected to display mixed performance. The Manufacturing PMI is expected to decline to 51.5 vs. the prior print of 52.2. However, the Services PMI will improve to 49.1 from the former figure of 47.3.

On the Tokyo front, downbeat Japan’s PMI data has weakened yen against the greenback. Japan’s Jibun Bank Manufacturing PMI has recorded lower at 51 than the expectations and the prior release of 51.8 and 52.1 respectively. Also, Services PMI remained downbeat at 49.2 from the consensus of 50.7 and the former figure of 50.3.