USD/JPY extends upside on firmer US Dollar, all eyes on US CPI, Fed rate decision

• USD/JPY trades in positive territory for the fourth consecutive day on Wednesday. 
• The US CPI inflation report and the Fed interest rate decision will be closely watched later on Wednesday. 
• The BoJ is expected to keep the short-term policy rate steady at 0-0.1% at its June meeting on Friday. 

The USD/JPY pair extends the rally near 157.15 during the early Asian trading hours on Wednesday. Traders prefer to wait on the sidelines ahead of the key events. The US Consumer Price Index (CPI) data will be released on Wednesday. The FOMC monetary policy meeting and the press conference will also be the highlights of the day. 

The stronger-than-expected US jobs data released last week fueled the expectation that the Federal Reserve (Fed) might keep interest rates higher for longer, which provides some support for the Greenback. Market players will take more cues from the US CPI inflation data. The US CPI figure is projected to show an increase of 3.4% YoY in May, while core CPI is forecast to rise 3.5% YoY. The US Fed is anticipated to keep rates on hold at its June meeting on Wednesday.

On the JPY’s front, the Bank of Japan (BoJ) is expected to maintain interest rates unchanged on Friday. Additionally, nearly two-thirds of economists from a Reuters poll showed the BoJ is expected to start tapering its monthly bond buying, now set at around 6 trillion yen ($38 billion). In the meantime, the interest rate divergence between the US and Japan continues to undermine the Japanese Yen (JPY) against the USD and create a tailwind for the USD/JPY pair.