USD/JPY eyes more weakness below 144.40 on upbeat market mood, US NFP eyed

• USD/JPY is looking to surrender the immediate support of 144.40 amid a volatile DXY.
• The yen bulls are not giving much importance to the geopolitical tensions.
• A decline in the US labor cost index won’t offset the impact of soaring inflationary pressures.

The USD/JPY pair is hovering around the crucial support of 144.40 in the Tokyo session. The asset has established firmly below 144.50 and is expected to display sheer volatility as the US dollar index (DXY) has sensed a firmer selling interest. The DXY has dropped sharply below 111.00 and may test Wednesday’s low at around 110.00.

An improvement in the risk appetite of the market participants has been observed as S&P500 futures have rebounded strongly after a subdued New York session. Last hour recovery in New York and continuation of upside momentum in Tokyo has underpinned risk-on impulse, which is also hurting the DXY.

It seems that Japanese yen investors have shrugged off uncertainty over geopolitical tensions with North Korea for a while but things have not been fixed yet. The Japanese military has prepared military drills in response to ballistic missiles from North Korea without any prior intimation. Meanwhile, comments have arrived from South Korea President Yoon Suk-yeol that the firing of an intermediate-range ballistic missile is aimed at hitting strategic assets.

Going forward, the US Nonfarm Payrolls (NFP) data will be of utmost importance. The employment generation process is elevating but at a diminishing rate. As per the estimates, the US NFP will release lower at 250k vs. the former figure of 315k. The catalyst that is expected to impact much is the Average Hourly Earnings data, which is seen declining by 10 basis points (bps) to 5.1% on an annual basis.

Price pressures in the US economy are at elevated levels and higher earnings are required to offset the same. A decline in the labor cost index may dent the sentiment of households.