Solid Goold Trading

Monday’s Edition

With Nick Goold

USD/JPY was the main focus for many traders last week, moving above 162 as markets tested the Japanese government’s willingness to intervene. Intervention warnings from Japanese officials, together with rumors that intervention may have started, triggered a quick retracement, although actual intervention was not confirmed.

The key economic data highlight of the week was the U.S. employment report, which came in weaker than expected, with the economy adding only 57,000 jobs in June. This marked a reversal from the recent trend of strong U.S. data, causing the U.S. dollar to weaken and gold to rise. The weaker jobs data also reduced expectations that the Fed may need to raise interest rates again, helping U.S. equities move higher.

In Japan, there was positive economic news as the Tankan survey showed sentiment among large manufacturers improved for a fifth consecutive quarter. The index rose to 22 from 17, its strongest reading since 2018. WTI crude oil was relatively quiet, continuing to test lower as there were no significant headlines to drive prices in either direction.

Markets This Week

U.S. Stocks

Although it was a quieter week due to the U.S. holiday on Friday, the Dow still managed to reach a fresh record high. Weaker-than-expected U.S. employment data lowered interest rate expectations, making stocks more attractive to investors. This week may also remain relatively quiet, but with the market still holding above the 10-day moving average, following the short-term uptrend appears to be the preferred strategy. Resistance levels are at 53,000 and 54,000. Support is seen at 52,000, 51,000, 50,000, 49,500 and 49,000.

Japanese Stocks

The Nikkei came under profit-taking pressure last week, moving back below the important 70,000 level. This was not unexpected given how strongly the market has rallied this year. USD/JPY was supportive at the start of the week as it moved higher, but when the pair later pulled back on fears of possible Japanese intervention, this also weighed on Japanese stocks. The outlook for Japanese equities remains broadly positive, but with the market now below the 10-day moving average, range-trading strategies may be more suitable this week. Resistance is seen at 70,000, 71,000, 72,000, 73,000, 74,000 and 75,000, while support is at 67,500, 66,500 and 65,000.

USD/JPY

USD/JPY started the week strongly, continuing its uptrend as traders focused on the interest rate gap between the U.S. and Japan. However, weaker U.S. employment data and signs that Japanese authorities may intervene without warning caused the pair to turn lower, breaking below the 10-day moving average and triggering a sharp move down on Thursday. Buyers returned near the lower levels, with support holding above 160, but the risks of buying USD/JPY have increased now that the pair is below the 10-day moving average and intervention concerns remain high. At the same time, the interest rate spread still supports the upside, so range trading may be the best approach this week in potentially volatile conditions. Resistance is at 162.00, 163.00 and 165.00, while support is seen at 161.00, 160.50, 160.00, 159.00, 158.00, 157.00, 156.00, 155.50 and 155.00.

Gold

Gold moved lower at the start of last week, once again testing below the $4,000 level as the recent downtrend continued on a stronger U.S. dollar and higher interest rate expectations. However, support held near $4,000 for the second time, forming a double bottom. Weaker-than-expected U.S. employment data then reduced rate hike expectations, which supported gold and pushed the market back above the 10-day moving average. The rebound from the lows was sharp, so some consolidation is possible this week. However, with support holding at $4,000, medium-term traders may look to focus on buying on weakness. Resistance is at $4,200, $4,300, $4,400, $4,500, $4,600 and $4,665, while support is at $4,100, $4,000, $3,900, and $3,800.

Crude Oil

Crude oil remained weak last week, with prices continuing to move lower in quiet market conditions. Traders still expect the Iran conflict to move toward a resolution, and there were no major headlines to support oil prices. The 10-day moving average is still moving lower, so the short-term trend remains bearish. Selling while prices stay below this level may remain the better strategy, but a move back above the 10-day moving average could lead to a quick rebound if new risks from Iran appear. Resistance is at $75, $85, $90, $95 and $100, while support is at $67.50, $65, and $60.

Bitcoin

Bitcoin held recent support early last week before moving higher after weaker-than-expected U.S. employment data lowered interest rate expectations. This was positive for Bitcoin and helped prices move back above the 10-day moving average, breaking the recent short-term downtrend. Overall, the market remains in a range between $55,000 and $65,000, so range trading still appears to be the preferred strategy. However, given how far prices have fallen over the past couple of months, medium-term traders may also look to buy on weakness. Resistance is at $65,000, $75,000, $80,000, $85,000, and $90,000, while support is at $60,000, $55,000 and $50,000.

This Week’s Focus

Monday: E.U. HCOB Eurozone Construction PMI, U.K. S&P Global Construction PMI, E.U. PPI and Retail Sales, U.S. S&P Global Services PMI and ISM Non-Manufacturing PMI
Tuesday: Japan Household Spending, U.K. Halifax House Price Index and BoE MPC Meeting Minutes, U.S. Trade Balance
Wednesday: Japan Current Account, Australia Building Approvals, U.S. FOMC Meeting Minutes
Thursday: China CPI and PPI, U.S. Existing Home Sales
Friday: Japan PPI

The week after U.S. employment data is usually quieter, with fewer important data releases. This week, traders may focus on the latest Federal Reserve meeting minutes for clues about future interest rate policy under the new Fed chairman. USD/JPY may also remain volatile as the risk of Japanese intervention to support the yen stays high.