Solid Goold Trading

Monday’s Edition

With Nick Goold

The market prepared last week for this week’s U.S. Federal Reserve meeting and expectations of a 0.25% cut in interest rates. U.S. PPI inflation came in below expectations and CPI matched forecasts, making it highly likely that the Fed will cut rates. U.S. jobless claims were worse than expected, following weak payroll data earlier in the month, reinforcing the view of a slowing U.S. economy. The European Central Bank kept its policy rate unchanged at 2.15%, while gold extended its rally to fresh record highs on safe-haven demand and lower-rate prospects.

In currency markets, USD/JPY tested lower after the softer U.S. inflation data and on rising expectations that the Bank of Japan will raise rates this year. The pair found support and closed the week near unchanged. Japanese GDP data beat forecasts, and optimism over the appointment of a new prime minister following Ishiba’s resignation further supported sentiment toward Japan.

Equities remained the main focus as U.S. and Japanese stock indexes surged to record highs, driven by expectations of a U.S. rate cut, with the market looking for the next trigger to spark a large move in FX markets.

Markets This Week

U.S. Stocks

U.S. equities hit record highs again last week, supported by expectations that the Federal Reserve will begin cutting interest rates after soft U.S. inflation data. AI-related names remained strong, helping technology stocks outperform the broader market. However, while indexes reached new highs, the short-term uptrend lacks momentum, suggesting range trading is the preferred strategy ahead of the upcoming Federal Reserve meeting. Key resistance is at 45,750, 46,000, and 47,000, with support at 45,700, 45,000, 44,000, and 43,000.

Japanese Stocks

The Nikkei 225 gained 3% last week on optimism over a new Japanese prime minister and positive sentiment from strong U.S. equities. Better-than-expected Japanese industrial production confirmed the economy is performing more strongly than anticipated. Last week’s price action was very positive, so following the uptrend by buying on weakness looks like the best short-term strategy now. Resistance is at 45,000円 and 46,000円, while support is at 44,000円, 43,000円, and 42,000円.

USD/JPY

Stronger-than-expected Japanese GDP data increased expectations that the Bank of Japan will raise interest rates this year, bringing USD/JPY down to test support at 146 early last week. That support held, prompting a rebound toward the middle of the recent 146–149 range by the week’s end. Range trading remains the favored approach in the short term, with a preference for selling, which also suits the medium-term outlook. Key levels remain unchanged, with resistance at 148, 149, and 150, and support at 146 and 145.

Gold

Despite concerns that gold is overbought, prices climbed to fresh record highs last week ahead of the expected U.S. interest rate cut this week. The current buying is largely speculative, following the strong uptrend with no clear resistance on the charts. However, the likelihood of a quick reversal is increasing, making selling on signs of fading momentum the best short-term strategy, while medium-term traders may prefer to stay patient and wait for a retracement to buy. Resistance levels are at $3,600, $3,700, and $3,800, with support at $3,600, $3,500, and $3,450.

Crude Oil

WTI found support at last month’s lows early in the week as fighting intensified between Russia and Ukraine. However, the market met resistance at the downward-sloping 10-day moving average and closed the week near unchanged, staying under pressure close to support as concerns about oversupply and a slowing U.S. economy encouraged selling. With technical indicators pointing lower, selling into strength remains the preferred strategy. Resistance levels are at $65, $70, and $75, while support lies at $60 and $55.

Bitcoin

Bitcoin surged back above the key $112,000 level last week on expectations that the U.S. Federal Reserve will cut interest rates next week. Reports of large buyers returning to the market and increased demand for Bitcoin ETFs, alongside anticipation of positive regulatory actions for crypto ETFs, added to the bullish momentum. Now back above $112,000, the best approach appears to be buying on strength, with technical indicators pointing higher. Resistance levels are at $120,000, $125,000, and $150,000, while support lies at $112,000, $105,000, and $100,000.

This Week’s Focus

Monday: China Industrial Production, E.U. Trade Balance, U.S. NY Empire State Manufacturing Index
Tuesday: U.K. Unemployment Rate, E.U. Industrial Production, U.S. Retail Sales and Industrial Production
Wednesday: Japan Trade Balance, U.K. CPI, E.U. CPI, U.S. Housing Starts and Fed Interest Rate Decision
Thursday: Australia Unemployment Rate, U.K. BoE Interest Rate Decision, U.S.Initial Jobless Claims
Friday: Japan National CPI and BoJ Interest Rate Decision, U.K. Retail Sales

This week is set to be busy, with the U.S. expected to cut official interest rates and central bank meetings in the U.K. and Japan where both are expected to keep rates unchanged. How each central bank explains its decision will be closely watched by traders and is likely to create volatility. U.S. retail sales and Japanese inflation are the key economic releases, and it will be interesting to see whether the recent narrow ranges in FX are broken or if equities and gold reverse. Overall, it should be a week full of trading opportunities.