USD/JPY finds cushion near 142.00 as USD Index rebounds ahead of US Inflation

The USD/JPY pair has sensed an intermediate cushion around 142.00 in the late London session. The asset has picked some strength as the US Dollar Index (DXY) has extended its recovery sharply to near 102.50. The strength in the USD Index is propelled by expectations of more interest rate hikes from the Federal Reserve (Fed).

S&P500 futures have turned marginally positive after sharply recovering losses, portraying a significant recovery in the risk-on market mood. The US Dollar Index is expected to extend its upside journey as steady June Nonfarm Payrolls and upbeat labor cost figures are sufficient to confirm the resumption of the policy-tightening spell by the Fed. The yields offered on 10-year US Treasury bonds have jumped to 4.08%.

June’s NFP report released on Friday reported fresh additions of 209K while investors were expecting an increase of 225K. In May, fresh payroll additions were 306K. The Unemployment Rate has dropped to 3.6%. Meanwhile, payroll expenditures maintained at 0.4% and remained higher than the consensus of 0.3%. Also, Annualized Average Hourly Earnings remained at a steady pace of 4.4%.

Households with higher disposable will result in an elevation in price pressures and would force Fed policymakers to raise interest rates further. Investors will get clarity about price pressures after the release of the inflation data, which will release on Wednesday at 12:30 GMT.

Meanwhile, the Japanese Yen sharply appreciated against the US Dollar amid rumors of intervention by the Bank of Japan (BoJ) and Japanese officials in the currency domain to provide a cushion to its domestic currency.