USD/JPY rises from 137.50 although risk-on sentiment hogs limelight, US Inflation watched

After a brief inventory adjustment of about 137.50 in the early Asian session, the USD/JPY pair has recovered. The US Dollar Index (DXY) has become erratic after repeatedly failing to surpass the crucial 105.20 threshold. The USD Index (DXY) is languishing below the key support level of 105.00.

Apart from that, a considerable recovery in the risk-on profile is boosting the Japanese Yen. S&P500 futures are maintaining the gains recorded on Monday in anticipation of a decrease in the U.S. Consumer Price Index (CPI) data.

In the meantime, demand for US Treasury bonds has declined as investors anticipate stronger interest rate recommendations from the Federal Reserve (Fed) during Wednesday's monetary policy meeting. The yields on 10-year US Treasuries have surpassed the crucial resistance level of 3.60 percent.

Tuesday's session will continue to center on US inflation data. The headline CPI is seen lower at 7.3% against the earlier report of 7.7% led by a strong reduction in oil prices and US Producer Price Index (PPI) data. Also, the core CPI is anticipated to decrease to 6.1% from 6.3% previously. Investors should not disregard a recent comeback in labor demand and buoyant demand in the US service sector, which could result in an unexpected increase in inflation.

On the Tokyo front, policymakers at the Bank of Japan (BOJ) are anticipated to initiate a new round of policy easing to stimulate economic activity. Inflation remains stable at 2% as a result of subdued household demand brought on by sluggish wage expansion.