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Lower inflation helps the Dow return to 2023 highs

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Nick Goold

Dow Jones Index

The Dow Jones held support (33,610) at the start of the week resulting in a positive week. The CPI and PPI inflation data was lower than expected, continuing the recent slowing of price rises in the US economy. The annual increase in CPI slowed to 3.0%, its slowest pace since March 2021.

The weak inflation data saw the Dow return to the resistance at the highs of 2023, which held as the technical indicators remained pointing sideways. On Friday, US consumer sentiment data rose to its highest level in two years as consumers became more optimistic about lower inflation.

This week sees the release of US Retail Sales, but there are few important economic releases, so technical and sentiment analysis will drive the market. The Dow looks increasingly bullish as the US earning season starts, but it is best to trade the range until the market rises above 34600.

US30 daily July 16 chart

Resistance: 34600, 35000

Support: 33610, 33000, 32550, 31750

Nikkei 225 Index

The Nikkei index continues to retreat from recent highs as the market speculates that the Bank of Japan could adjust monetary policy at their July 27-28 meeting. Higher Japanese interest rates and falling US 10-year interest rates are pushing the USDJPY lower, weakening the Nikkei.

While US equities are pushing higher, the impact on the Nikkei has been relatively limited. After such a considerable rise in 2023, it is understandable that the Nikkei is taking a break and re-considering what could drive the next significant move higher.

The USDJPY is starting to find support at 138.00, which could prevent further losses in the Nikkei index this week. Expect quiet conditions in the week ahead, with the market likely to move sideways to higher.

JPN225 Daily chart July 16

Resistance: 34000, 35000

Support: 31650, 30800, 30500, 30000

Great