USD/JPY slips inside the woods ahead of Fed-BOJ interest rate policy

• USD/JPY has slipped back into the long-week consolidation of 142.55-143.80 range.
• Investors should be prepared for a bigger-than-expected rate hike by the Fed.
• An improvement in Japan’s National CPI has strengthened the odds of a ‘neutral’ stance by the BOJ.

The USD/JPY pair has sensed barricades while attempting to cross the round-level resistance of 144.00. The attempt was also meant to deliver an upside break of the long-week consolidation formed in a 142.55-143.80 range. A failure in the breakout of the same has shifted the pair back inside the woods and a subdued performance is expected from the asset ahead.

The potential trigger for Wednesday will be the interest rate decision by the Federal Reserve (Fed). The central bank is expected to deliver a third consecutive 75 basis points (bps) rate hike. However, the space is huge for a bigger-than-expected rate hike as retail demand is upbeat and labor market conditions are extremely tight in the US economy. So bets over a full percent rate hike are also soaring and could turn out as a winner.

Apart from that, the outlook on growth prospects, interest rate peak, and especially on inflation rate will be keenly watched. Markets have discounted all the alternative decisions to be taken by the Fed. Post the Fed meeting, investors will prepare for a further decisive move.

On the Tokyo front, a decent improvement in Japan’s National Consumer Price Index (CPI) data has accelerated further projections and odds of a shift in policy stance by the Bank of Japan (BOJ). Statistics Bureau of Japan reported the National CPI at 3%, higher than the forecasts and the prior release of 2.6%. Also, the core CPI that excludes food and oil prices has improved to 1.6% that the former figure of 1.2% but remained lower than the expectations of 1.7%.