USD/JPY inter-markets: seems to continue with its recovery trend

Friday's blockbuster jobs report for the month of July is extending support to the the greenback, with the USD/JPY pair extending its recovery trend to move above 102.50 level to touch a 4-day high. 

A strong headline NFP print has revived hopes of an eventual Fed rate-hike decision later during this year and is reflected in CME group's FedFund watchtool that is currently pricing-in around 40% probability of such an action in December. Rising prospects of a Fed rate-hike triggered a short-covering rally that boosted the pair back above 102.00 handle on Friday. 

On Monday, the pair benefited further from upbeat sentiment surrounding the greenback and got an additional boost from the prevalent risk-on sentiment. Ongoing slide in the Volatility Index (VIX) accompanied with rise in the US and Japanese 10-year Treasury bond yields is further supportive of improving global risk appetite. 

In absence of any major economic releases, either from Japan or from the US, the pair is likely to derive its move from prevalent risk-sentiment surrounding riskier assets - like equities and commodities. Moreover, Japan’s summer holiday season begins later this week, which would further dry up the liquidity and reduce volatility. Hence, buoyant sentiment around equity markets and the greenback seems more likely to assist the pair to further extend its near-term recovery trend, at-least until Friday. 

However, Friday's US economic releases, which include - monthly retail sales data and consumer confidence index, would provide fresh impetus for the pair's near-term trajectory.