Solid Goold Trading

Monday’s Edition

With Nick Goold

The shorter trading week, due to U.K. and U.S. holidays, had no major economic releases, but the data that did come out was mixed. U.S. GDP was weaker than expected, while durable goods orders were stronger than forecast.

Recent market trends continued. U.S. and Japanese equities moved higher, while USD/JPY tested higher levels as the Bank of Japan stayed on the sidelines and did not intervene. Optimism around reports that the U.S. and Iran were moving toward a 60-day ceasefire extension, along with a possible reopening of traffic through the Strait of Hormuz, helped push oil prices lower and supported risk appetite through much of the week.

U.S.-Iran deal optimism also contributed to a fall in longer-term U.S. interest rates. However, Fed officials remained cautious on inflation. Fed Governor Lisa Cook said she was prepared to raise rates if inflation continued moving in the wrong direction, reminding markets that rate-cut hopes may still be premature.

Markets This Week

U.S. Stocks

The Dow posted another week of gains, and the outlook remains positive for now. There is always a risk of surprise news, but while the current uptrend remains in place, buying near the 10-day moving average remains the preferred strategy. Resistance levels are at 51,200, 51,500 and 52,000. Support is seen at 50,000, 49,500, 49,000, 48,500 and 48,000.

Japanese Stocks

Japanese equities remain popular with investors around the world, with the Nikkei rising 4% last week and now up more than 25% this year. The strong uptrend remains in place, so buying on weakness remains the preferred strategy for both short-term and long-term traders. Resistance is seen at 67,000, 68,000, 69,000 and 70,000, while support is at 64,000, 62,000, 61,000, 60,000 and 59,000.

USD/JPY

Despite the risk of Bank of Japan intervention, traders continued to focus on the large interest rate gap between the U.S. and Japan. Comments from a Fed official about the possibility of rate hikes if inflation stays high also encouraged buying. However, the Bank of Japan still remains likely to support the yen if USD/JPY moves above 160. A selling opportunity could appear if the pair falls below the 10-day moving average and breaks the recent uptrend from the past few weeks. Resistance is at 160.00, 160.50, 162.00 and 165.00, while support is seen at 158.00, 157.00, 156.00, 155.50 and 155.00.

Gold

Gold volatility increased as the market fell below the May lows, encouraging technical selling in the middle of the week. However, a fall in long-term U.S. interest rates, as crude oil moved lower toward the end of the week, helped gold recover and finish the week close to unchanged. The quick rebound was positive, and with long-term U.S. rates falling, gold is more likely to trade sideways to higher this week. Resistance is at $4,600, $4,665, $4,750 and $4,900, while support is at $4,500, $4,450, and $4,350.

Crude Oil

WTI crude oil fell significantly as reports that Washington and Tehran had tentatively agreed to extend a ceasefire reduced fears of supply disruption. The market remained volatile because the deal was not final and still needed approval from President Trump. However, the downward trend is becoming stronger, so selling into strength may be the preferred strategy in the current environment, as long as the Iran situation does not worsen. Resistance is at $95, $100, $105, $110 and $120, while support is at $90, $80, $75, $70, and $67.50.

Bitcoin

Bitcoin selling continued last week as investor interest kept falling. The technical picture also remained bearish, with the 10-day moving average pointing lower and the market breaking below support at $75,000. The downtrend is worth following for now, so selling into strength remains the preferred strategy as long as prices stay below the 10-day moving average. Resistance is at $75,000, $80,000, $85,000, and $90,000, while support is at $65,000, $60,000, and $55,000.

This Week’s Focus

Monday: Japan Capital Spending, E.U. HCOB Eurozone Manufacturing PMI and Unemployment Rate, U.K. S&P Global Manufacturing PMI, U.S. S&P Global Manufacturing PMI and ISM Manufacturing PMI
Tuesday: Australia Current Account and Building Approvals, E.U. CPI, U.S. JOLTS Job Openings
Wednesday: Japan S&P Global Services PMI, Australia GDP, E.U. HCOB Eurozone Services PMI, U.K. S&P Global Composite PMI, U.S. ADP Nonfarm Employment Change, S&P Global Services PMI, Factory Orders and Beige Book
Thursday: Australia Trade Balance, U.K. S&P Global Construction PMI
Friday: Japan Household Spending, E.U. GDP, U.S. Nonfarm Payrolls

Markets have been quiet recently, but volatility could rise soon. The main focus remains on U.S.-Iran negotiations and whether oil supply could increase. USD/JPY will also stay important, as further yen weakness could raise the risk of Bank of Japan intervention. Traders will also be watching the key U.S. employment data released on Friday.: