USDJPY, Dow, Nasdaq Analysis: Heated Highs Ahead of US CPI

Key Events

US CPI: Week’s catalyst for broader market volatility on Wednesday
Federal Reserve and BOJ Rate Decisions: Anticipated rate adjustments could shake markets.
Holiday Rallies: Potential delays in traditional Christmas rallies until 2025

USDJPY

As detailed in my previous article, USDJPY, Silver Forecast: Bullish Rebounds in Question, several bullish indicators emerged on Friday as USDJPY tested the 148.60 support level. This coincided with positive technical setups and market sentiment leaning towards a BOJ rate hike after the Fed’s expected rate cut in mid-December. Volatility risks remain on the horizon with US inflation data.

US Indices: Are There Any New Highs for 2024?

US indices started the year strong, recording successive highs before capping 2024 with December’s anticipated Santa Claus rally and New Year effect. This aligns with bullish momentum for Trump’s presidency. Despite these highs, the Dow Jones faces bearish correction pressures from the 45,000 zone, driven by inflationary concerns, geopolitical instability, and profit-taking ahead of the holidays. As markets brace for 2025, the combination of these risks and uncertainties under Trump’s leadership sets the stage for volatility.

Technical Analysis: Quantifying Uncertainty

USDJPY Forecast: Weekly Time Frame – Log Scale

Source: Tradingview

USDJPY is still holding a bullish rebound from the key support at 148.60. The bullish indicators supporting the setup are:

The 3-day RSI rebounding from the neutral zone and moving average
Price action holding above the 20-period SMA following the November drop
The 150-mark continuing to serve as psychological support

If the 148.60 low holds firm, the next resistance is at 153.30, aligning with the lower boundary of the long-term trendline connecting consecutive lows from January 2023 to 2024. Longer-term resistance levels include 155, 157 and 160, reflecting significant Yen weakness and potential BOJ intervention risks. From the downside, the next level to watch at 146.80 in the event of further downside. Deeper declines could retest levels 144 and 140.

Dow Analysis: Daily Time Frame - Log Scale

Source: Tradingview

For a longer-term technical analysis of the Dow chart, the details are published in the following article EURUSD, Dow Forecast: On Edge Ahead of Key US Data

On the daily time frame, the Dow is consolidating near the 45,000 level, forming another top amid overbought RSI conditions and negative divergence. The psychological implications of the 45,000 mark and its Fibonacci extension reinforce the significance of this zone. The 4H RSI reflects a rebound potential, aligning with recorded highs at 44,300 in November.

Upside momentum could resume with a firm close above 45,200, eyeing resistance at 47,000. Conversely, a break below 44,280 could extend retracement towards 43,300, 42,200, and 41,500.

Nasdaq Analysis: 3Day Time Frame – Log Scale

Source: Tradingview

As previously mentioned in EURUSD, Nasdaq Forecast: Inflation Data and Holiday Volatility, Nasdaq fell short of the 2,700-mark on Monday following momentum slowdowns in the Dow and S&P ahead of the US CPI and FOMC meeting. The 4H RSI, displayed on the daily chart, reflects a retest of the neutral zone as the price tests 21,400 support.

Further upside can be confirmed with a close above 21,800, eyeing resistance at 22,800. A break below 21,280 could deepen corrections to 21,140, 20,800, and 20,300, aligning with the bottom border of the primary uptrend since October 2022 lows.

--- Written by Razan Hilal, CMT on X:@Rh_waves and Forex.com Youtube

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.