Ella 
USD/JPY struggled to recoup the previous day’s losses, hovering around 146.60 during the Asian session on Tuesday, ahead of the release of the US Consumer Price Index (CPI). The pair has come under downward pressure due to bullish comments from the Bank of Japan (BoJ) and the lackluster performance of the US dollar (USD).
Over the weekend, Bank of Japan Governor Kazuo Ueda’s speech indicated that the Bank of Japan is moving towards a possible reversal of its negative interest rate policy.
In an interview with the Yomiuri Shimbun, Kazuo Ueda said the Bank of Japan may change its negative interest rate policy by the end of this year if data supports progress towards achieving its 2% annual inflation target.
The U.S. dollar index (DXY) rebounded near 104.60, halting losses as U.S. bond yields performed well. At press time, the 10-year Treasury yield rose to 4.29%.
However, dollar bulls turned cautious ahead of the release of the key U.S. Consumer Price Index (CPI) on Wednesday. Market forecasts indicate that the overall consumer price index (CPI) will record a monthly increase of 0.5%, an improvement from the 0.2% in the previous period.
Core CPI is expected to remain unchanged at 0.2%. Any deviation from these inflation data could cause the market’s bias towards the US dollar (USD) to quickly shift.
The job market has improved over the past week, highlighted by two strong reports including the ISM Services Purchasing Managers Index and initial jobless claims. Both figures beat market consensus. As long as economic data continues to paint a positive picture, USD/JPY is likely to continue rising higher.
A strong performance from the US dollar (USD) could see the USD/JPY pair rebound. The dollar is expected to remain strong by effectively absorbing the impact of rising interest rates. In addition, positive economic data released by the United States will provide additional support to the currency.
