As investors await US Services PMI, the USD/JPY pair declines to approximately 134.00

During the Tokyo session, the USD/JPY pair attempted to break over the immediate barrier of 134.50. As investors await fresh impetus from United States Services PMI data, the asset is anticipated to stay on tenterhooks. As Federal Reserve (Fed) policymakers do not anticipate a continuation of the present rate of interest rate hikes, the risk profile remains favorable.

As reported by Reuters, Chicago Fed President Charles Evans stated on Friday, "We will likely have a little higher Fed policy rate peak even as we lower the pace of rate hikes."

The US Dollar Index (DXY) is lingering near its immediate support level of 104.50 and is poised to test Friday's low near 104.40. Against the backdrop of a large reduction in the desirability of safe-haven assets, the risk appetite theme is likely to continue pressuring US Dollar bulls.

In the meantime, 10-year US Treasury rates have risen after falling below 3.50 percent during the Asian session, as market sentiment turns cautious ahead of US Services PMI data. The economic data is anticipated to be 55.6, a decrease from the previous release of 54.4.

In the US Services PMI spectrum, the New Orders Index is anticipated to increase to 58.5 from 56.5. This suggests that future demand will be solid, which might de-anchor short-term inflation expectations and thereby destroy the risk-on profile.

On the Tokyo front, Bank of Japan (BOJ) Governor Haruhiko Kuroda emphasized the possibility of an inflation deceleration beginning in CY2023. This may encourage the BOJ to continue policy easing in order to maintain inflation near the 2% objective. In the future, the data on Total Household Expenditures will be of the utmost importance. Annually, the economic statistics is anticipated to rise to 3.4% from 2.3% in the previous report.