USD/JPY inter-markets: intrinsic point to near-term consolidation phase ahead of Friday’s NFP data

After a minor pull-back for two consecutive sessions, the USD/JPY pair regained bullish traction on Tuesday and is now heading back towards 113.00 handle, reversing all of its losses posted in the previous session.

Despite of the looming uncertainty surrounding the OPEC meeting on Wednesday and Italian constitutional referendum on Sunday, the prevalent bullish sentiment surrounding the greenback seems to be receding. Growing investor confidence that aggressive fiscal spending by Trump administration would lead to faster US economic growth, and inflationary pressure, has fueled speculations of faster Fed rate-tightening cycle in 2017, which continues to underpin the US Dollar and has limited near-term corrective slide for the major 

Looking at the intrinsic, the pair's up-move on Tuesday has been solely driven by USD price dynamics and has been not reaffirmed by flattening US and Japanese 10-year Treasury bond yields. However, the Volatility Index (VIX) remained at depressed levels and is supportive of the pair's latest leg of up-move. 

With most intrinsic not supporting the pair's up-leg on Tuesday, any adverse news / development over OPEC output deal and (or) a slight recovery in VIX would boost safe-haven demand and force investors to trim their bullish USD bets. This might lead an extended period of consolidation for the pair ahead of the keenly watched US monthly jobs data (NFP) on Friday, which would help investors to determine the possibilities and timing of next Fed rate-hike action, beyond December meeting, and would provide fresh impetus for the pair's near-term directional move.