• USD/JPY slides below 148.65, eyes key support at 147.20 as yen strengthens
• Nasdaq 100 futures close below 200DMA for the first time since March 2023
• Tech losses weigh on carry trades, raising risk of capitulation selling
• All eyes on payrolls, but AI-driven selling could override fundamentals

DeepSeek 2.0?

Is China’s emergence as an AI superpower about to spark another sharp selloff in USD/JPY and the Nasdaq 100 , similar to the deep drawdown seen earlier this year when DeepSeek rattled U.S. tech valuations? No one knows for sure, but price action in FX and U.S. equity futures on Thursday suggests the risks may be building after Alibaba (NYSE: BABA ) unveiled QwQ-32B, a new AI reasoning model it claims can rival DeepSeek’s R1.

Alibaba’s announcement sent its Hong Kong-listed shares soaring over 8% to fresh multi-year highs, but what stood out was the weakness in Nasdaq 100 and S&P 500 futures in Asia, hinting at early selling pressure in U.S. tech. Things got even more interesting heading into the European handover, with USD/JPY erasing earlier gains to slide below 148.65—an important technical level that had attracted dip buying over the past two weeks.

Correlations Converge

As the yen rallied, U.S. stock futures tumbled, with the one-minute correlation between USD/JPY and S&P 500 /Nasdaq 100 futures holding above 0.9 for much of the U.S. session on a rolling hourly basis. While higher bond yields, uncertainty over U.S. trade policy, and potential capitulation selling may have contributed, it’s hard to ignore parallels with the DeepSeek-driven rout in January.

While USD/JPY’s relationship with rate differentials remains intact—making Friday’s U.S. non-farm payrolls a key risk event—it’ll be worth watching whether the pair resumes its downward march in Asia.

USD/JPY Resumes Bear Trend

Having closed at its lowest level since October after overwhelming bids beneath 148.65, and with downside momentum building, USD/JPY bears will be eyeing another run toward key support at 147.20 today. The pair came close to testing the level on Thursday before reversing higher, but that may not be enough to deter shorts, even with payrolls looming. With U.S. tech losses pressuring yen carry trades, the risk of capitulation selling could easily override fundamental data in the short term.

A break of 147.20 would put 144.23 in focus, given the significance of this level in September and October last year. On the topside, 148.65 may now act as resistance, with 151 a more substantial barrier beyond that.

Nasdaq 100 Slammed Below 200DMA

Adding to the increasingly bearish outlook for U.S. tech, Nasdaq 100 futures closed below the 200-day moving average on Thursday for the first time since March 2023. Given how sharply the index has rebounded from this level in the past two years, the bearish close raises the risk of a potential trend shift. However, a meaningful break of uptrend support, currently just below 19,900, is needed for confirmation.

Horizontal support sits either side at 20,010 and 19,850, with a break below all three likely to spark further selling. If that unfolds, 19,575 and 19,150 come into view. On the other hand, if the uptrend holds, traders should watch the 200DMA, 20,720, and 21,000 as key upside levels.

Adding to the sense that tech may be at an important juncture, traded volumes have picked up over the past fortnight, suggesting there are still plenty of willing buyers despite increasingly bearish price action. While MACD remains firmly bearish, a slight RSI divergence from price hints that selling momentum may be starting to wane.

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