Nasdaq 100 drops further as USD/JPY nears key resistance and oil price rockets
Technical analysis of the Nasdaq 100 as it drops further while USD/JPY nears key resistance and the oil price rockets to 2022 levels.
Macro update
Oil shock unsettles markets:
Brent crude oil surged about 27% to roughly $113 a barrel and US crude jumped more than 28% to $119 a barrel, one of the biggest single-day gains on record, as Middle East conflict disrupted energy supplies and shipping through the Strait of Hormuz.
Global equities slump:
Asian markets led the sell-off, with Japan’s Nikkei 225 dropping around 7% and South Korea’s benchmark falling more than 8%, while futures pointed to additional declines for Wall Street and European indices.
Energy supply fears escalate:
Output cuts from Iraq and Kuwait alongside shipping disruptions in the Strait of Hormuz heightened concerns about sustained shortages, with some analysts warning oil could climb towards $120 - $130 a barrel.
Inflation worries reshape policy outlook:
The spike in energy prices pushed bond yields higher and forced investors to scale back expectations for rate cuts from the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE).
Dollar strengthens amid risk aversion:
Investors sought safety in the US dollar, sending the euro and sterling lower while currencies of major Asian energy importers also weakened.
Gold dips despite geopolitical turmoil:
Bullion prices slipped as a stronger dollar and rising bond yields dampened demand, with traders also taking profits after the metal’s strong rally over the past year.
Nasdaq 100 drops further still
The Nasdaq 100 has come off last week's 25,179 high and may slip to the 200-day simple moving average (SMA) at 24,195 below which beckons the November low at 23,854.
Minor resistance can now be seen around the 24,456 early February low and then near the mid-December 24,648 low.
Short-term outlook: bearish while below the 4 March 24,796 low.
Medium-term outlook: neutral with a bearish bias while above the 3 March low at 24,316; failure there would make the technical outlook bearish and eye the November 2025 low at 23,854.
Nasdaq 100 daily candlestick chart
USD/JPY is gunning for the ¥160 region
USD/JPY advance is ongoing with the January highs at ¥159.22 - ¥159.45 being in sight. Together with the psychological ¥160 region these levels may once again act as resistance, though.
Were this area to be overcome, the April 2024 peak at ¥160.21 would be back on the plate.
Immediate upside pressure should be maintained while the 5 March low at ¥156.46 underpins.
Short-term outlook:
Bullish while above the 5 March low at ¥156.46 high.
Medium-term outlook:
Neutral with a bullish bias while above the ¥152.10 January low but below the ¥159.45 January peak.
USD/JPY daily candlestick chart
Brent rallies by up to 25%
The sharp advance in the Brent crude oil price amid the Iran was has so far taken it to $113.73 in Asia trading, a level last seen in June 2022. Since then it has slid back to around $102.50, still up close to 13%.
A highly volatile trading session lies ahead with the Brent crude price likely to oscillate around the $100 per barrel mark.
Above $113.73 lies the July 2022 peak at $115.87 and below Monday morning's $102.30 low the psychological $100 mark.
Short-term outlook:
Bullish while above the 6 March $81.66 low.
Medium-term outlook:
Bullish while above the 6 March $81.66 trough.
Brent crude oil daily candlestick chart
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