USD/JPY sustains above 130.00 but is still inside the woods, the spotlight is on Fed

• USD/JPY is struggling to breach its 14-pips range as investors are awaiting the release of the Fed’s policy.
• The DXY could continue its upside move on the announcement of balance sheet reduction and hawkish guidance.
• The Japanese yen will remain in the doldrums of BOJ’s ultra-loose monetary policy.

The USD/JPY pair is displaying a lackluster performance in the Asian session as investors are playing the waiting game ahead of the announcement of the interest rate decision by the Federal Reserve (Fed). The asset is juggling in a 14-pips range as investors have trimmed their positions significantly.

Fed chair Jerome Powell is going to feature a 50 basis point (bps) rate hike as per the market consensus. To tame the multi-decade high inflation, a rate hike cycle with a mega start looks highly required. Meanwhile, the US dollar index (DXY) is stuck around 103.50 amid anxiety over the dictation from Fed Powell. It is worth noting that the DXY has witnessed a juggernaut rally on the expectation of an extreme hawkish tone by the Fed. Usually, the happening of a certain event, results in an intense sell-off in the asset, however, the asset could gain further on the announcements of quantitative tightening and hawkish guidance.

On the Japanese yen front, the broader weakness in Tokyo on the continuation of ultra-loose monetary policy by the Bank of Japan (BOJ) has favored the asset for a while. The BOJ is sticking to releasing more stimulus to spurt the growth rate as the economy has yet not reached its pre-pandemic growth levels.  

Apart from the Fed’s policy, US ISM Services PMI will remain in focus, which is seen at 58.5. While Japanese markets will be on holiday on account of Greenery Day.