Dow Jones Index
Activity picked up last week as the U.S. comes to an end. Monday saw the Dow Jones Index move above the 10-day moving average, signalling a break of the recent downward trend. While there was no significant news to trigger buying at the start of the week, the 10-year U.S. interest rate hitting resistance encouraged investors to return to equities.
On Thursday at a South Africa conference, Atlanta Federal Reserve Bank President Raphael Bostic said that the current interest rates are "appropriately restrictive" and should help achieve the Fed's 2.0% inflation target. The stock market received Friday's U.S. employment data positively, mainly due to lower inflation pressures, despite the unemployment rate rising to 3.8%. The labour force participation rate climbed to 62.8%, with 736,000 people reentering the job market, its highest point since February 2020. Average hourly earnings increased by 4.3% year-over-year, slightly below expectations.
This week starts with a U.S. holiday; notably, no significant economic data releases will be released. Nevertheless, attention will be directed towards Thursday when various Federal Reserve Presidents are set to give speeches, which will be under close scrutiny by the financial community. On the technical front, the outlook is tilting positive. However, the expectation is for sideways price action, as the market likely consolidates last week's gains.
Resistance: 35000, 36000, 36500, 37000
Support: 34600, 34,000, 33610, 33000, 32550, 31750
Nikkei 225 index
The Nikkei experienced an uplifting week, surging by over 2%. This upward momentum was primarily driven by investor optimism, stemming from indications that the U.S. Federal Reserve might be nearing the end of its interest rate hiking cycle, which bolstered overall market sentiment. Additionally, investor confidence was further buoyed by China's recent initiatives to rejuvenate its markets and stimulate its economy.
Further buoying the Nikkei, Japan's government has committed to actions aimed at mitigating the impact of soaring fuel costs on households and businesses. They have vowed to implement measures to address the record-breaking gasoline prices and have decided to prolong the subsidy program for oil wholesalers past September, ensuring its continuation until year's end.
Concerns are mounting that inflationary pressures might be negatively impacting the Japanese economy. Contrary to forecasts, Japan's unemployment rate saw an unanticipated jump to 2.7% in July from the previous month, surpassing the projected rise to 2.5%. This is coupled with a declining labour demand, particularly evident in the dwindling number of job openings within the manufacturing sector.
The Nikkei has shown positive momentum, but resistance at the 33,000 level persists. Similarly, the USDJPY is encountering resistance and is beginning to exhibit bearish signs. Given these conditions, waiting for the market to fall before joining the medium-term uptrend might be better. The beginning of the week could offer potential selling opportunities for those trading short-term.
Resistance: 33000, 34000, 35000
Support: 31650, 30800, 30500, 30000