As investors anticipate US Services PMI, the USD/JPY pair falls to around 134.00

The USD/JPY pair attempted to surpass the immediate barrier of 134.50 during the Tokyo session. As investors anticipate fresh momentum from U.S. Services PMI data, the asset is expected to remain on tenterhooks. As Federal Reserve (Fed) policymakers do not expect the current rate of interest rate hikes to continue, the risk profile remains favorable.

Charles Evans, president of the Chicago Fed, was quoted by Reuters as saying on Friday, "We will likely have a little higher Fed policy rate peak even as we slow the pace of rate hikes."

The US Dollar Index (DXY) is hovering near its immediate support level of 104.50 and is likely to test Friday's low at 104.40. In the context of a significant decline in the desirability of safe-haven assets, the risk appetite theme is likely to continue exerting pressure on US Dollar bulls.

In the interim, 10-year US Treasury rates have increased after falling below 3.50 percent during the Asian session, as market sentiment turns cautious prior to the release of US Services PMI data. The projected economic statistics is 55.6, a decline from the previous report of 54.4.

The New Orders Index is expected to rise from 56.5 to 58.5 on the US Services PMI spectrum. This indicates that future demand will be robust, which might de-anchor short-term inflation expectations and ruin the risk-on profile.

On the Tokyo front, Governor of the Bank of Japan (BOJ) Haruhiko Kuroda stressed the potential of a decrease in inflation beginning in CY2023. This may encourage the BOJ to continue easing monetary policy in order to keep inflation near the 2% target. Total Household Expenditures statistics will be of the utmost relevance in the future. The economic data are projected to increase annually by 3.4%, up from 2.3% in the previous report.