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USD/JPY Rejected at Channel Resistance, Nasdaq 100 Comes Alive as US Yields Tank

USD/JPY Rejected at Channel Resistance, Nasdaq 100 Comes Alive as US Yields Tank

Diego Colman, Contributing Strategist

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USD/JPY ANALYSIS

USD/JPY rose to multi-month highs during Tuesday's European session, but erased gains and reversed course sharply following weak and lackluster U.S. economic data. By late afternoon, the pair was losing 0.35% to trade at 146.00, after reaching a peak of 147.37 in the morning.

Earlier in the day, the latest consumer confidence survey showed that sentiment had fallen sharply and more than expected in August, dropping to 106.01 from 114.00 previously and erasing consecutive gains in June and July.

Another report revealed that job openings fell to 8.8 million in July, reaching their lowest level since March 2021, a clear indication that the labor market is weakening, buckling under the weight of restrictive monetary policy aimed at curbing inflation.

US ECONOMIC DATA

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Source: DailyFX Economic Calendar

Unfavorable macro results have reduced the likelihood of additional Fed tightening, though they have not eliminated the possibility of further policy firming entirely. In this context, yields have begun to head downwards, creating a somewhat bearish backdrop for the U.S. dollar in the session.

For a sustained retreat in USD/JPY, there needs to be consistent evidence of a slowdown in the U.S. economy. Otherwise, the pair might maintain its long-term uptrend once the dust settles, supported in part by the Bank of Japan's ultra-loose monetary stance.

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USD/JPY TECHNICAL ANALYSIS

From a technical analysis standpoint, USD/JPY jumped and charged at channel resistance at 147.40 on Tuesday, but the rally couldn’t maintain its momentum and faced a swift rejection, signaling an aggressive concentration of sellers just a tough below 147.50.

Even with the retracement, the overall outlook for the pair remains bullish, evident from the consistent pattern of higher highs and higher lows. Nevertheless, given the substantial upward movement seen this year, the possibility of a consolidation phase should be taken into consideration.

Focusing on major price levels, support rests at 144.60, followed by 143.85. Further down the line, attention shifts to the 50-day simple moving average. On the resistance side, the first ceiling to consider emerges at 147.40, and 149.00 thereafter.

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USD/JPY Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% -10% -6%
Weekly 4% -7% -2%
What does it mean for price action?
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USD/JPY TECHNICAL CHART

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USD/JPY Chart Created Using TradingView

NASDAQ 100 TECHNICAL ANALYSIS

The Nasdaq 100 soared on Tuesday, marking its third consecutive trading session of gains. This ascent not only counteracted a portion of the losses incurred over the previous four weeks but also picked up momentum from the anticipation that worsening U.S. economic data will prompt the Federal Reserve to cease rate hikes before transitioning to a more dovish stance in early 2024.

Turning to technical analysis, the tech index has managed to overtake its 50-day simple moving average following the latest upswing. If this move is sustained, the bulls could become emboldened to launch an attack on 15,500, the next resistance to keep an eye on. Successful clearance of this barrier could open the door for a retest of the 2023 peak.

In the event of a bearish reversal, initial support comes into view near 14,850. This floor aligns with the lows seen on June 26-27 and coincides with a medium-term rising trendline. While the Nasdaq 100 might find stability around these levels during a pullback, a breakdown has the potential to intensify selling pressure and establish conditions conducive to a decline toward 14,600.

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NASDAQ 100 TECHNICAL CHART

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Nasdaq 100 Futures Chart Prepared Using TradingView

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