Risk-Off Week Ahead: Central Banks, Oil Prices, and AI Security Concerns
Markets are bracing for a risk-off week as concerns over higher crude oil prices, a more hawkish Federal Reserve and Bank of Japan outlook, and growing AI security risks escalate.
The Federal Reserve and Bank of Japan are both expected to raise interest rates by 25 basis points this week, with market-implied probabilities above 80%. The rate decisions themselves are largely priced in, but the guidance from Wednesday's FOMC meeting and Friday's BOJ meeting may have a greater influence on the broader market direction.
The Nasdaq is facing several fundamental headwinds, including elevated US bond yields near their yearly highs, Anthropic-related AI security concerns, expectations of Fed and BOJ rate hikes, and crude oil prices weighing on the inflation and growth outlook. The index is testing one-month support near 28,800 and a breakdown below this level would target the 50% and 61.8% extension levels.
The USD/JPY price action has been respecting Fibonacci retracement levels since its recent breakdown below the April 2025-July 2026 uptrend. Price action recently dropped below the 38.2% retracement at 154.80 and is now holding only a few points above the 50% retracement.