USD/JPY aims to recapture 140.00 as Fed to continue policy-tightening spell further

The USD/JPY pair has shown some recovery after dropping to near 139.66 in the early London session. The asset is expected to recapture the crucial resistance of 140.00 as investors are hoping that the Federal Reserve (Fed) will raise interest rates further to bring down sticky United States inflation.

S&P500 futures have carry-forwarded losses to Europe generated in the Asian session, indicating cautious market sentiment. US economic prospects are under threat as the street is anticipating that more interest rate hikes are required to keep building pressure on US Consumer Price Index (CPI). Former Richmond Fed President Jeffrey Lacker cited that current interest rates at 5.0-5.25% should rise to 6% in order to bring down sticky inflation.

The US Dollar Index (DXY) has found an intermediate support around 104.00. It is likely that the USD Index would fall into a volatile contraction phase due to a light economic calendar. It seems that investors are preparing for the next week's Consumer Price Index (CPI) data.

Meanwhile, Ray Dalio, founder of Bridgewater Associates, said the US is seeing stubbornly high inflation along with elevated real interest rates, as reported by Bloomberg. He further added “We are at the beginning of a late, big-cycle debt crisis when you are producing too much debt and have a shortage of buyers,”

The Japanese Yen has failed to fetch strength despite discussions over an exit from the ultra-dovish interest rate policy by Bank of Japan (BoJ) Governor Kazuo Ueda. About BoJ’s interest rate guidance, Bloomberg reported that BoJ watchers are seeing no policy adjustments in June as BoJ Ueda is consistently supporting the need for monetary stimulus to keep inflation steadily above 2%.