• USD/JPY is sensing resistance around 134.40 as DXY is facing correction after a juggernaut rally.
• To tame the galloping inflation, the Fed is expected to raise its interest rates by 75 bps.
• The BOJ will continue with its prudent monetary policy despite the inflation rate above 2%.

The USD/JPY pair has faced some offers while overstepping the critical resistance of 134.40 in the Asian session. The asset is oscillating in a narrow range of 133.59-134.66 after forming a fresh two-decade high at 135.16. A volatility contraction is expected in the major going forward amid crucial events ahead. The interest rate announcement by the Federal Reserve (Fed) on Wednesday will be followed by the monetary policy of the Bank of Japan (BOJ).

Fed chair Jerome Powell is going to feature a strict monetary policy considering the price pressures. Investment Banks and marquee investors have started betting over a rate hike announcement by 75 basis points (bps) this time. The market participants have elevated their rate hike expectation over 50 bps as inflation is at a galloping pace now and is needed to be tamed sooner rather than later.  The Fed has already elevated its rate cycle by 25 bps and 50 bps in March and May respectively and even a minute impact is not visible.

Meanwhile, the US dollar index (DXY) has attracted some offers after hitting a high of 105.26 in the Asian session. The asset is holding itself firmly above the psychological support of 105.00.

On the Japanese yen front, investors are bracing for a continuation of an accommodative stance by the Bank of Japan (BOJ). The inflation rate has crossed the critical figure of 2%, however, the price pressures are much guided by firmer oil prices rather than an all-round surge in goods and services.