USD/JPY, Nasdaq Outlook: Rate Hikes, AI Concerns and Oil Prices

Risk-off sentiment is building across markets this week as concerns increase over higher crude oil prices, a more hawkish Federal Reserve outlook, a more hawkish Bank of Japan outlook and growing AI security risks.

Several factors are shaping the outlook:

• The Federal Reserve and the Bank of Japan are both expected to raise interest rates by 25 basis points this week, with market-implied probabilities above 80%. Since the rate decisions are largely priced in, the outlook and guidance from Wednesday’s FOMC meeting and Friday’s BOJ meeting may have a greater influence on the broader market direction. Developments surrounding the U.S.–Iran geopolitical situation and crude oil prices will also remain important.
• AI-related risks are becoming more concrete. Anthropic has reported that AI-assisted, multi-agent workflows have been used in cyber operations, including reconnaissance, exploitation and data exfiltration. Growing calls for stronger AI oversight could weigh on AI-related equities and the Nasdaq through increased regulatory, valuation and concentration risks.

CNN Fear & Greed Index

Source: CNN Fear & Greed Index

With sentiment leaning toward caution, the dollar and dollar pairs may stabilize with a positive bias. Equities and U.S. indices, along with metals and cryptocurrencies, may instead face increasing downside pressure.

USD/JPY Price Outlook: Weekly Time Frame — Log Scale

Source: TradingView

Following the breakdown below the April 2025–July 2026 uptrend, USD/JPY has been respecting the Fibonacci retracement levels of that advance.

Price action recently dropped below the 38.2% retracement at 154.80 and is now holding only a few points above the 50% retracement and the next projected support zone near 152.

This level also aligns with the lower boundary of the parallel April 2025–July 2026 channel. At the same time, the daily RSI is showing a bullish divergence from oversold levels last seen in 2024, while the weekly RSI is approaching the oversold zone.

This setup hints at a potential final leg lower before a possible reversal during the month.

Bearish scenario: A breakdown below 152 would signal further weakness in the dollar and additional strength in the yen. This could target the lower boundary of the larger channel that has been in place since 2023, near 149.

The 149 area could create another major reversal risk, particularly if momentum sinks deeper into oversold territory across multiple time frames.

Bullish scenario: Reclaiming 154.80 would strengthen the short-term bullish case and open the way toward the 158.40–161 zone.

This area represents a defining barrier between long-term bullish continuation toward the yearly highs and potentially 170, and the risk of another corrective move.

Overall, the bias leans toward a short-term bearish correction while the longer-term bullish structure remains in place.

Nasdaq Price Outlook: Daily Time Frame — Log Scale

Source: TradingView

The Nasdaq is currently facing several fundamental headwinds:

• Elevated US bond yields near their yearly highs
• Anthropic-related AI security concerns
• Expectations of Fed and BOJ rate hikes
• Crude oil prices weighing on the inflation and growth outlook

This combination is weighing on Nasdaq price action as the index tests one-month support near 28,800, which aligns with the 38.2% extension of the June–July–August wave.

A breakdown below 28,800 would target the 50% and 61.8% extension levels near 28,400 and 28,000, respectively, before increasing the risk of a deeper drawdown toward 26,600, which aligns with the 100% extension.

The daily RSI is tilted to the bearish side, amplifying these risks unless price action reverses course and closes above the multi-week range near 29,800.

A close above 29,800 would reassert the bullish bias and open the way toward 30,100 and the yearly highs near 30,800.

Such a scenario would require a renewed risk-on environment, a less hawkish Federal Reserve and a decline in bond yields and crude oil prices.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves