USD/JPY aims to shift auction below 132.00 as US slowdown fears escalate

The USD/JPY pair surrendered the immediate cushion of 132.00 in the early Asian session. The major will likely shift its auction profile below 132.00 amid sheer volatility in the US Dollar Index (DXY). Trading action could be lower in USD/JPY on Monday as Japanese markets are closed on account of Coming of Age Day.

The risk appetite of the market participants has improved further as the S&P500 futures have extended their upside journey in early trade on Monday. Also, the US Dollar Index (DXY) is sensing more offers after a less-hawkish commentary from Chicago Federal Reserve (Fed) President Evans. The USD Index has extended its downside to near 103.35 and is expected to extend further to near the six-month low, around 103.00.

Chicago Fed President Evans quoted in Wall Street Journal (WSJ), “It was possible the economic data would support raising the policy rate by 25 basis points at the Fed's next gathering”, as reported by Reuters.

Also, Atlanta Fed bank president Raphael Bostic said on Friday that how the economy evolves will shape what the Federal Reserve has to do, as reported by Reuters. He further warned that "The US economy is definitely slowing", led by a significant reduction in activities in housing and other interest rate sectors. On policy rate projections, the Fed policymaker sees a terminal rate above 5% and a continuation of peak policy rates into CY2024.

On the Tokyo front, Japanese PM Fumio Kishida said on Sunday his government and the Bank of Japan (BoJ) must discuss their relationship in guiding economic policy after he named a new BoJ governor in April, as reported by Reuters. He further added the government might revise its decade-long blueprint with the BoJ that will focus on beating deflation, a move that would lay the groundwork for an exit from the BoJ's ultra-loose monetary policy.