Solid Goold Trading

Monday’s Edition

With Nick Goold

The impact of the previous week’s strong U.S. employment data did not continue for long. Markets started to focus on new events and the outlook ahead. The SpaceX IPO was the biggest IPO ever and became a major focus. Trading started on Friday, and the stock closed 19% higher. This helped reduce fears that such a large IPO could hurt the market. U.S. and Japanese equities both ended the week higher.

USD/JPY continued to move higher as U.S. inflation stayed strong. CPI rose 4.2% year over year, in line with expectations, but it was the highest reading since April 2023. PPI rose 6.5% year over year, above expectations and the highest reading since November 2022. These numbers supported the U.S. dollar.

WTI crude oil prices fell as a possible agreement between Iran and the U.S. appeared to move closer. Gold touched yearly lows as the stronger U.S. dollar led to more selling. Bitcoin found some support after recent weakness. The University of Michigan Consumer Sentiment Index also improved as consumers welcomed lower gasoline prices.

Markets This Week

U.S. Stocks

It was an encouraging week for the Dow, with the index holding support at 50,000 and finishing the week strongly. However, the technical picture still suggests a sideways market, and with U.S. inflation remaining a concern, large short-term gains may be difficult. This could create good opportunities for short-term range traders. Resistance levels are at 51,500 and 52,000. Support is seen at 50,000, 49,500, 49,000, 48,500 and 48,000.

Japanese Stocks

Japanese stocks moved lower for most of the week, but followed U.S. stocks higher at the end of the week and closed near the weekly highs. However, the uptrend has weakened, with the 10-day moving average now pointing sideways. This could be a volatile week, as the expected rise in Japanese interest rates may lead to different views on the outlook for Japanese equities. Instead of looking for a clear trend, trading against large moves may be the better short-term approach. Resistance is seen at 68,000, 69,000 and 70,000, while support is at 64,000, 63,000, 62,000, 61,000, 60,000 and 59,000.

USD/JPY

USD/JPY tested higher for most of the week as stronger-than-expected U.S. inflation data supported the dollar. However, lower WTI crude oil prices and resistance near the April highs limited further upside, leaving the pair almost unchanged by the weekly close. This could be an important week, with both the BOJ and Fed meetings in focus. For swing traders, the better risk-reward opportunities may still come from selling weakness, while day traders may look to follow short-term trends around this week’s major news announcements. Resistance is at 160.50, 162.00 and 165.00, while support is seen at 159.00, 158.00, 157.00, 156.00, 155.50 and 155.00.

Gold

Selling in gold continued last week as the stronger U.S. dollar and expectations of possible U.S. interest rate hikes encouraged further downside. The market touched new lows for the year, but support held around $4,000, allowing prices to recover before the weekly close. However, the downtrend remains strong, so the outlook stays bearish while gold remains below the 10-day moving average. Resistance is at $4,300, $4,400, $4,500, $4,600 and $4,665, while support is at $4,000, $3,900, and $3,800.

Crude Oil

WTI crude oil fell to its lowest levels since April as Iran and the U.S. moved closer to a deal to end the war. There is still concern that an agreement may not be completed quickly, and it could take time for Middle East oil shipments to fully resume. However, the current trend remains bearish, so selling strength ahead of the 10-day moving average may be the better short-term strategy. Resistance is at $90, $95, $100, $105, $110 and $120, while support is at $80, $75, $70, and $67.50.

Bitcoin

Bitcoin had a quiet week as the market found support around $60,000 and traders waited for the next major move. The successful SpaceX IPO helped improve risk sentiment and encouraged some buying, pushing Bitcoin back above the 10-day moving average and breaking the strong downtrend. In the short term, range trading looks more likely than a clear trend. 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. Trade Balance and Industrial Production, U.S. Industrial Production
Tuesday: China Industrial Production and Unemployment Rate, Japan BoJ Interest Rate Decision and BoJ Press Conference, Australia RBA Interest Rate Decision, E.U. ZEW Economic Sentiment, U.S. Housing Starts and Building Permits
Wednesday: Japan Trade Balance, U.K. CPI and PPI Input, E.U. CPI, U.S. Retail Sales, Fed Interest Rate Decision and FOMC Press Conference
Thursday: U.K. Unemployment Rate and BoE Interest Rate Decision, U.S. Philadelphia Fed Manufacturing Index
Friday: Japan National Core CPI and Monetary Policy Meeting Minutes, U.K. Retail Sales

It could be a big week for markets, with four major central bank meetings in focus. The Fed is expected to keep interest rates unchanged, but traders will be watching the first meeting under the new Fed chairman closely for any change in tone. The Bank of Japan is widely expected to raise rates, which could increase volatility in USD/JPY as the pair remains close to levels where intervention risk may rise. The RBA and Bank of England are both expected to keep rates steady, but their comments on inflation and future policy will still be important.

The BOJ meeting may be the biggest focus for yen traders. A 25 basis point rate hike to 1.0% is widely expected, so the market reaction may depend more on what the BOJ says about future rate hikes. With the yen still weak and inflation pressure continuing, any hawkish comments could lead to sharp moves in JPY pairs.

SpaceX is also likely to remain volatile after its IPO and could influence broader risk appetite in equity markets. U.S. retail sales and Japanese inflation data will also be important this week, giving traders more clues about the strength of the U.S. economy and the outlook for BOJ policy.