Technical analysis of the USD/JPY pair
The US dollar rose at the beginning of the week, supported by a rise in US Treasury yields after the release of the US ISM Manufacturing report, which showed a jump in the employment and price driven components of the survey. In this context, USD/JPY advanced more than 0.8% to ~137.40 in the afternoon, reaching its best level since early March.
The USD/JPY technical outlook turned more positive after the exchange rate breached the confluence resistance located at 136.60 on Monday, an area where the upper bound of the short-term ascending channel is aligned with the 200-day SMA and the 38.2% Fibonacci retracement. Sale Oct 2022 / Jan 2023.
If the pair holds above 136.60, the bulls may be encouraged to launch an attack on the 2023 highs, once a touch below the psychological level of 138.00. Success in driving above this hurdle could play the role of 140.00 area. In the event of a setback, initial support is located at 136.60, but if prices fall below this floor, a retest of 135.00 cannot be ruled out.
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Technical chart of the USD/JPY pair
USD/JPY chart created using TradingView
Future technical analysis of the S&P 500 index
The S&P 500 fell early last week, but encountered support at an ascending trend line extending off its March lows. From these levels, the index has made a strong comeback, with prices now testing key resistance near 4,200, as bears have repeatedly beaten the bulls since June last year, driving the index back in almost every test.
If history is a guide, technical resistance at 4,200 may curb the pace of recent gains and extinguish the positive momentum once again, paving the way for a moderate decline in the coming days. If the bearish scenario plays out, we might see a pullback towards the dynamic support at 4125 soon before a possible retest of the 50-day SMA at 4060.
On the other hand, if the bulls can push the S&P 500 decisively above the 4,200 mark, the bullish momentum may build and attract new buyers to the market and create the right conditions for a rise towards 4,310. This resistance corresponds to the 61.8% Fibonacci retracement level for shorting in 2022 and the August high of last year.
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