USD/JPY consolidates below 147.00, awaits US NFP report before the next leg up

• USD/JPY enters a bullish consolidation phase near its highest level since August 19.
• Bulls seem reluctant to place fresh bets ahead of the release of the US NFP report. 
• BoJ rate hike uncertainty and reduced bets for a 50 bps Fed rate cut lend support.

The USD/JPY pair is seen oscillating in a narrow range during the Asian session on Friday and consolidating its weekly gains to the highest level since August 19 touched the previous day. Spot prices currently trade below the 147.00 mark, unchanged for the day, as traders opt to move to the sidelines ahead of the release of the closely-watched US monthly employment details.

The popularly known US Nonfarm Payrolls (NFP) report is expected to show that the economy added 140K jobs in September, slightly lower than the 142K in the previous month, and the Unemployment Rate held steady at 4.2%. Apart from this, Average Hourly Earnings will be looked upon for cues about the size of the Federal Reserve's (Fed) rate cut at its next policy meeting in November. This, in turn, will play a key role in driving the demand for the US Dollar (USD) and provide some meaningful impetus to the USD/JPY pair. 

Heading into the key data risk, investors have been scaling back their bets for a more aggressive policy easing by the Fed amid signs of a still resilient US labor market. This pushed the USD Index (DXY), which tracks the Greenback against a basket of currencies, to a one-month top on Thursday. Furthermore, reduced bets for more BoJ rate hikes in 2024, along with the political uncertainty ahead of a snap election in Japan on October 27, could undermine the Japanese Yen (JPY) and act as a tailwind for the USD/JPY pair. 

Nevertheless, spot prices remain on track to register strong gains for the second week in the previous three and barring any big negative surprises from the US jobs data, the fundamental backdrop supports prospects for further gains. That said, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and the risk of a full-blown war in the region could benefit the safe-haven JPY. This might turn out to be the only factor holding back bullish traders from placing aggressive bets around the USD/JPY pair.