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