• USD/JPY is expected to witness more gains if the asset oversteps 135.50 decisively.
• Fed’s intention to elevate interest rates will remain intact despite lower US CPI print.
• The BOJ is committed to bringing pre-pandemic growth rates.

The USD/JPY pair is addressing an inventory distribution phase after a perpendicular upside move from the critical support of 133.00. Auctioning in an inventory distribution phase after an upside move indicates a continuation of an upside move after the climax of volatility contraction. The asset will prefer an establishment above 136.00 initially and later on will advance towards the all-time-highs around 139.40.

The US dollar index (DXY) got strengthened after the upbeat US Nonfarm Payrolls (NFP).  The US Nonfarm Payrolls (NFP) landed at 528k, significantly higher than the expectations of 250k and the prior release of 372k. Also, the jobless rate slipped to 3.5% from the consensus and the former print of 3.6%.

One fact which is concerning the market participants is the flat Average Hourly earnings data. The economic data has remained unchanged at 5.2%. Well, inflationary pressures are forcing the households to higher payouts for similar quantity purchased and, flat earnings growth at this stage are creating headwinds for them.  This may trim consumer confidence dramatically.

This week, the spotlight will remain on the US inflation data.  As per the consensus, the inflation rate may shift lower to 8.7% from its prior release of 9.1%. Thanks to the weak oil prices in July, which have managed to bring some exhaustion signals in the inflation data.  An occurrence of the same may drag the DXY extensively.

On the Tokyo front, the continuation of an ultra-loose monetary policy by the Bank of Japan (BOJ) will keep haunting the yen bulls. The BOJ is committed to spurting the growth rate and lifting that to the pre-pandemic levels as early as possible. Therefore, it is critical to pump much liquidity into the economy so that the investments could ramp up the wage price index and the inflation will remain above 2%.