USD/JPY Makes Giant Leap Upward, Destroys Notable Fib Support Line, S&P 500 Quivers Near 4,200

2 May 2023, Tuesday
USDJPY Makes Giant Leap Upward, Destroys Notable Fib Support Line, S&P 500 Quivers Near 4,200

What’s Happening with the US Dollar and S&P 500?


USD/JPY Technical Analysis


The US dollar has been doing well lately, especially after the release of the US ISM manufacturing report. This report showed that employment and prices paid components of the survey had gone up, which made the US dollar stronger. As a result, USD/JPY went up by more than 0.8% to around 137.40 in afternoon trading. This is the highest it’s been since early March.


USD/JPY’s technical outlook has turned more positive after the exchange rate breached confluence resistance located at 136.60 on Monday. This is an area where the upper bound of a short-term rising channel aligns with the 200-day simple moving average and the 38.2% Fibonacci retracement of the October 2022/January 2023 selloff.


If the pair holds above 136.60, bulls could become more confident and try to reach the 2023 highs just below the psychological 138.00 level. If they succeed, they could go even higher to the 140.00 region. However, if prices dip below 136.60, initial support rests at that level. If prices dip below that floor, a retest of 135.00 could happen.


S&P 500 Futures Technical Analysis


The S&P 500 fell early last week but found support at a rising trend line extended off the March lows. From those levels, the index has made a solid comeback, with prices now testing major resistance near 4,200. This is where the bears have repeatedly overpowered the bulls since June of last year, repelling the index lower on nearly every test.


If history is a guide, technical resistance at 4,200 may curb the pace of recent gains and extinguish positive impetus again, paving the way for a moderate pullback in the coming days. If the bearish scenario plays out, we could see a retrenchment toward dynamic support at 4,125 soon ahead of a possible retest of the 50-day simple moving average at 4,060.


On the other hand, if the bulls manage to get the S&P 500 decisively above the 4,200 barrier, upward momentum could gather pace, attracting new buyers into the market and creating the right conditions for a rally toward 4,310. This resistance corresponds to the 61.8% Fibonacci retracement of the 2022 selloff and last year’s August high.