USD/JPY inter-markets: risk-on environment supporting recovery momentum ahead of NFP

Having defended the very important 100.00 psychological mark, the USD/JPY pair staged a remarkable bounce back and has now erased all of its BOJ/FOMC-led declines. The ongoing recovery momentum is now six-day old and the pair has recovery nearly 240-pips from last week's low, trading well beyond 102.00 handle at the highest level since Sept. 21 around mid-102.00s.

The prevalent risk-on sentiment across global financial markets has been the key factor driving the pair higher. Recovery in the US and Japanese 10-year Treasury bond yields have been supportive of the risk-friendly environment. Moreover, suppressed level in the Volatility Index (VIX) is further pointing to the increasing investors appetite for riskier assets, which is eventually denting the safe-haven appeal of the Japanese Yen.

Meanwhile, the recent slew of upbeat US economic data, including Monday's release of stronger-than-expected US ISM manufacturing PMI, seems to have revived hopes of an eventual Fed rate-hike by the end of this year. The CME group's FedWatch Tool is pointing to about 56% of such a move in December and is extending further support to the bid tone around the US Dollar.

However, this week's monthly jobs report, popularly known as NFP, would be the key US economic indicator that will be looked upon to reaffirm market expectations. The monthly employment details are due for release on Friday and would be a key determinant of the pair's next leg of direction move in the near-term.