USD/JPY treads waters above 146.50 to snap the recent losses

USD/JPY struggles to recover from the previous day’s losses ahead of the release of the US Consumer Price Index (CPI), treading waters around 146.60 during the Asian session on Tuesday. The pair experienced downward pressure due to the bullish comments from the Bank of Japan (BoJ) in addition to the lackluster performance of the US Dollar (USD).

Over the weekend, remarks from the Bank of Japan's Governor Kazuo Ueda suggested that the Japanese central bank is moving closer to potentially reversing its negative interest rate policy.

In an interview with the Yomiuri Shimbun newspaper, Governor Ueda stated that by the end of the year, there could be a change in the negative interest rates set by the Japanese central bank, provided that the data supports the notion that the Bank of Japan is making progress towards achieving its 2% annual inflation target.

US Dollar Index (DXY) beats around 104.60, snapping losses on the back of positive performance of United States (US) bond yields. The yield on the 10-year US Treasury bond improved to 4.29% at the time of writing.

However, Greenback bulls turn cautious ahead of the release of the key US Consumer Price Index (CPI), which is due to be released on Wednesday. Market forecasts are anticipating the headline Consumer Price Index (CPI) to register a 0.5% (MoM) increase, which is an improvement from the previous period's 0.2% reading.

Core CPI figures are expected to remain unchanged at 0.2%. Any deviations from these inflation figures could lead to rapid shifts in the market's bias towards the US Dollar (USD).

The job market had shown advancement in the past week, highlighted by two strong reports including the ISM Services PMI and Initial Jobless Claims. Both of the data exceeded the market consensus. The USD/JPY pair is likely to continue its upward trajectory as long as economic data continues to portray a positive outlook.

The USD/JPY pair could be rebounded due to robust performance by the US Dollar (USD). The Greenback is projected to maintain its strength by effectively absorbing the impacts of higher interest rates. Furthermore, the currency could receive additional support from positive economic data coming out of the US.