• USD/JPY is holding itself above 136.00 as investors are focusing on PMI figures.
• Costly oil and food prices contaminate Japan’s inflation figure near 3%.
• Fed Powell is expected to dictate a consecutive 75 bps interest rate hike in July.

The USD/JPY pair is displaying back and forth moves in a narrow range of 136.10-136.30 in the Asian session. The asset has turned sideways after taking support from 135.69 on Wednesday. Investors should brace for a volatility contraction and be biased to the greenback bulls on a broader note.

Federal Reserve (Fed) chair Jerome Powell’s testimony on Wednesday is expected to strengthen the greenback bulls against the Japanese yen. Fed Powell has guided a similar interest rate hike in July like the June monetary policy with 75 basis points (bps) interest rate hike and an extreme hawkish tone. The focus of the Fed is to bring price stability to the economy, which currently demands higher interest rates. What music to the ears is that the economy is strong enough to tackle the headwinds of tight monetary policy.  

In today’s session, investors’ focus will remain on the Purchase Managers Index (PMI) figures. The Manufacturing PMI is expected to slip to 56 from the prior print of 57. While the Services PMI may advance marginally to 53.5 from the former figure of 53.4. On the yen front, the Jibun Bank Manufacturing PMI is seen surging to 54.4 vs. 53.3 reported earlier. However, the Services PMI may slip to 52.2 vs. 52.6 prior.

Meanwhile, the yen investors are majorly focusing on the Consumer Price Index (CPI) figures, which are due on Friday. The annual National CPI is likely to increase to 2.9% from the former print of 2.5%.  It is worth noting that the core CPI may slip to 0.4% vs. 0.8% recorded earlier. This clears that the price pressures in Japan are majorly contributed by higher oil and food prices.