USD/JPY surges toward 136.50 as DXY reclaims 107.00, with US Inflation in the spotlight

As of early Tokyo, the US dollar index (DXY) has surpassed the significant barrier of 107.00, propelling the USD/JPY pair firmly towards the critical resistance of 136.50. In a broader sense, the asset has traded in a band of 135.22-136.56 during the last week. On Wednesday of this week, the US Consumer Price Index (CPI) will be released, therefore a strong performance is anticipated.

The early estimate for the US CPI is 8.7 percent, which is somewhat higher than the previous announcement of 8.6 percent. While the core CPI may decrease to 5.7% from 6.0% previously recorded. Lower predictions for the core CPI indicate that oil and food prices are reducing their influence, while commodities and other items continue to weaken market sentiment.

In any case, it is imperative that the inflation rate be tamed by increasing household income. In this setting, the U.S. economy is failing to increase Average Hourly Earnings in a manner that would offset the impact of rising price pressures.

During the Tokyo session, the US dollar index (DXY) is indicating a stronger upward trend. The DXY has established itself over 107.00 as a greater inflation rate in the US economy will support the Federal Reserve's determination to raise interest rates substantially (Fed).

Thursday will see the publication of Tokyo's Industrial Production figures, which investors are expecting. The economic statistics is anticipated to arrive at -2.8%, the same as its previous yearly reading. However, quarterly numbers may remain unchanged at -7.2%. Aside from that, the passing of former Japanese Prime Minister Shinzo Abe has dampened the market sentiment in Japan.