USD/JPY trades above 146.50 as bulls gear up for another upward move

• USD/JPY trades higher around 146.60 despite the market caution.
• US Dollar (USD) experiences support as investors are still pricing in the odds of a rate hike.
• Japan's Household Spending data showed the worst drop since February, 2021.

USD/JPY continues the winning streak that started on Friday, trading around 146.60 during the Asian session on Tuesday. The pair is experiencing upward support despite the market caution after the modest employment data from the United States (US) as the likelihood of no interest rate adjustment by the US Federal Reserve (Fed) in the September meeting.

Furthermore, the upward trajectory of the USD/JPY pair could experience support as investors are still factoring in the odds of a quarter basis points (bps) rate hike by the Fed.

However, Japan's disappointing year-on-year Household spending data for July, which was unveiled on Monday, could be contributing to the downward pressure on the Japanese Yen (JPY). The statistics revealed the worst decline since February 2021, with the actual figure registering at -5.0%, notably worse than the anticipated -2.5%. June's figure was -4.2%. This outcome implies that the Bank of Japan (BoJ) may refrain from making any immediate adjustments to its accommodative monetary policy.

US Dollar Index (DXY), which measures the performance of the Greenback against six other major currencies, hovers around 104.10 at the time of writing. The US Dollar (USD) was underpinned by both the steady employment growth in August and the recovery in US Treasury yields. Market participants await the ISM Services PMI for August, scheduled to be released on Wednesday.