USD/JPY consolidates above the 141.40 area, investors await the US CB Consumer Confidence

• USD/JPY consolidates in a tight range above 141.45 on Tuesday. 
• Market anticipated that the Federal Reserve (Fed) would hike rates by 25 basis points (bps) to 5.25–5.50%.
• Japanese policymakers are expected to maintain a dovish policy stance.
• Market participants will keep an eye on the FOMC meeting and BoJ meeting later this week.

The USD/JPY pair oscillates in a narrow range between 141.20 and 141.60 heading into the European session on Tuesday. The major pair currently trades around 141.45, down 0.01% for the day. Market participants prefer to wait to be sidelined ahead of the Federal Reserve's (Fed) and the Bank of Japan's (BoJ) interest rate decisions later this week. 

On Monday, the preliminary S&P Global US Manufacturing PMI data came in higher than anticipated at 49, above market expectations of 46.4 and the previous reading of 46.3 in June, while the Services PMI declined to 52.4 from 54.4. The US S&P Global Composite PMI fell to 52 from 53.2 in June.

Apart from the mixed US PMI figure, the data released last week indicated that inflationary pressure is easing and the labor market is tight. These data have led some to speculate that the Fed is about to end its tightening monetary policy after the July meeting.

The FOMC meeting is widely expected to raise its benchmark rate by another quarter-point on Wednesday. It is widely anticipated that the Fed will increase interest rates by 25 basis points (bps) to 5.25–5.50%. However, Fed Chairman Jerome Powell's press conference on Wednesday will hint at some clues about the possibility of interest rate guidance for the entire year. A hawkish stance from the Fed could trigger the US Dollar against the Japanese Yen.

Across the pond, the Bank of Japan (BoJ) will announce its monetary policy on Friday. BoJ Governor Kazuo Ueda put an end to speculation of a Yield Control Curve policy change and said that there was still some way to go before reaching the 2% inflation target. Those comments indicate that Japanese policymakers are expected to maintain a dovish policy stance in order to keep inflation steady above 2%. Additionally, BoJ policymakers prefer looking at more data to ensure wages and inflation continue to rise before modifying policy. 

The monetary policy divergence between the BoJ and Fed might exert pressure on the Japanese Yen against its major rivals and could be a headwind for the USD/JPY pair. Market participants will monitor the FOMC and BoJ meetings scheduled for Wednesday and Friday, respectively. This key event could trigger volatility across financial markets.

Later in the day, US CB Consumer Confidence will be due in the North American session. The Japanese Tokyo Core CPI YoY, US Advance GDP QoQ, and the Fed’s preferred measure of inflation, the core Personal Consumption Expenditure (PCE) Price Index MoM, will be released later this week. Traders will take cues from the data and find opportunities around the USD/JPY pair.