USD/JPY finds support near 139.00 as DXY recovers, awaiting US CPI.

• The USD/JPY pair has found support near 139.00, following in the footsteps of the DXY.
• A volatile action in the DXY cannot be ruled out as investors are bracing for US inflation.
• On the street it is anticipated that there would be no alterations in the current ultra-moderate stance of the BOJ.

The pair USD/JPY has seen decent buying interest after falling to around 139.00 early in the American session. The USD/JPY pair is supported by the DXY rally. The price action in the USD Index indicates that the bulls are not going to give up all their gains easily, as investors are shifting their focus to the US Consumer Price Index (CPI) data, which is due to be released. on Tuesday.

S&P 500 futures have added further gains earlier in the American session amid strong hopes for a neutral interest rate policy from the Federal Reserve (Fed). With US factory activity having contracted steadily over the past seven months, the service sector hardly showing any expansion, and labor market conditions also beginning to ease, Fed policymakers would argue with minus the possibility of a prolonged pause in monetary policy tightening.

The Dollar Index has undergone a dynamic recovery to stand near 103.45 points. A volatile action in the DXY cannot be ruled out as investors are bracing for US inflation.

Taking into account the recent drop in the price of oil, headline inflation is expected to continue its downward trend; however, core CPI could show persistence as services become more expensive. Investors should keep in mind that two-thirds of US economic activity comes from the service sector.

Regarding the Japanese yen, investors’ attention will remain focused on the Bank of Japan’s interest rate decision, which will be announced next week. The current ultra-moderate stance is expected to remain unchanged as BOJ Governor Kazuo Ueda has not stopped talking about the need for monetary stimulus to boost wages and household demand.