• USD/JPY bulls stay in the market on interest rate differentials. 
• All eyes turn to the US CPI data on Wednesday. 

USD/JPY bull has stayed with the course despite an initial drop in the European session and in Asia´s start of the day. The price recovered from late London's lows of 132.97 and printed a high of 133.80 in New York´s midday trading and despite some dovish comments from US central bank officials that weighed on the DXY index. 

USD/JPY remains bid as the Greenback remains supported on the interest rate differentials with higher T-note yields on Tuesday weighing on the yen, along with news that Japan’s March machine tool orders posted their biggest decline in 2-1/2 years. Japan Mar machine tool orders fell -15.2% YoY, the third consecutive monthly drop and the largest decline in 2-1/2 years. Additionally, Bank of Japan Governor Kazuo Ueda signaled no hurry to dial back its massive stimulus. 

All eyes on US CPI and Fed sentiment

Meanwhile, the Consumer Price Index on Wednesday is expected to show that headline inflation rose by 0.2% in March, while core inflation rose 0.4%. This follows a series of data leading up to the event on Wednesday, including Friday´s Nonfarm Payrolls that have added to expectations that the Federal Reserve will complete one more rate hike. The data showed that employers added 236,000 jobs while the unemployment rate fell to 3.5%.

Consequently, The Federal Reserve is expected to hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed pivot where a rate cut by year-end on could be on the cards to combat the risks of a recession. Nevertheless, Fed officials have stressed that the central bank's policy path will depend on incoming data. Chicago Fed President Austan Goolsbee said the Fed should be cautious about raising rates in the face of recent banking stress. Meanwhile, New York Fed President John Williams explained that the prospect of the Fed raising its benchmark interest rate only once more and in a 25 basis point increment is a useful starting point.