USD/JPY finds a mild bounce from 126.70, weakness looks likely on vulnerable DXY

• USD/JPY is expected to witness a pullback selling action amid broader weakness in the DXY.
• Investors have started ignoring the uncertainty over the rate hike decision by the Fed.
• The Tokyo inflation has tumbled to 2.4% vs. 2.7% estimates and 2.5% earlier.

The USD/JPY has witnessed an unreliable rebound after hitting an intraday low of 126.67 in the Asian session. The asset has been trading in a defined range since Tuesday and is expected to continue its volatility contraction amid the unavailability of any significant economic event in today’s session. Considering the ongoing weakness in the greenback on a broader note, the asset may find offers soon and will resume its downside journey. The asset is oscillating around critical support of 127.00.

Fading Federal Reserve (Fed)’s rate hike fears in the global markets have brought an extreme sell-off in the US dollar index (DXY). The DXY has printed a fresh monthly low at 101.43 and the market participants are betting over more weakness in the counter on dismal Gross Domestic Product (GDP) numbers. The US Bureau of Economic Analysis reported the annualized GDP numbers at -1.5%, lower than the estimates of -1.3% and the prior print of -1.4%.

On the Japanese yen front, the Statistics Bureau of Japan has released the Tokyo Consumer Price Index (CPI) at 2.4%, lower than the estimates of 2.7% and the prior print of 2.5%. The Japanese administration is worrying over the anchored price pressures. In response to that, Bank of Japan (BOJ) Governor Haruhiko Kuroda has commented that the price rise should be accompanied by wage hikes in order to sustain inflation at desired levels.