Solid Goold Trading

Monday’s Edition

With Nick Goold

The Japanese yen weakened toward 164 against the U.S. dollar, its lowest level in around 40 years. Middle East tensions supported the dollar, while concerns about Japan’s finances and the large gap between U.S. and Japanese interest rates continued to pressure the yen. Warnings of possible intervention had little effect.

Global stock markets fell as investors became more cautious about the large amounts being spent on artificial intelligence. A sharp rise in oil prices also hurt market sentiment. WTI crude moved higher as fighting in the Middle East continued and hopes for a ceasefire faded.

Higher oil prices increased concerns that inflation could rise again, making a Federal Reserve rate hike more possible. The European Central Bank kept rates unchanged but said future increases were still possible. Economic data was limited and mostly close to expectations.

Markets This Week

U.S. Stocks

The Dow Jones fell for a third consecutive week as high WTI crude oil prices and tariff concerns encouraged further selling. The index remains in a short-term downtrend, and there may be more room to fall after the strong gains since June. Selling near the 10-day moving average may offer the best opportunities while the bearish trend continues. Resistance levels are at 52,500, 53,000, 53,500 and 54,000. Support is seen at 51,500, 51,000, 50,000, 49,500 and 49,000.

Japanese Stocks

The Nikkei 225 ended the week lower as concerns about high valuations and losses in overseas equity markets weakened sentiment. The index continued to fall despite the weaker yen, which is a bearish sign. Selling into strength near the 10-day moving average remains the preferred strategy this week. Resistance is seen at 66,000, 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

USD/JPY strengthened significantly last week, rising above 163 and testing 164. Higher WTI crude oil prices increased U.S. inflation concerns, supporting expectations that the interest-rate gap between the United States and Japan will remain wide. Japan’s government spending plans also raised concerns about increased government borrowing. For short-term traders, selling near resistance at 164 may offer the best opportunity early this week, ahead of the important Federal Reserve and Bank of Japan meetings. Resistance is at 164.00 and 165.00, while support is seen at 162.00, 161.00, 160.50, 160.00, 159.00, 158.00, 157.00 and 156.00.

Gold

Gold briefly fell below $4,000 early last week as higher WTI crude oil prices increased expectations of higher U.S. interest rates, which is negative for gold because it does not provide a yield. Support near last month’s low held, with central banks likely buying at lower levels, but the weekly recovery remained limited. Strong support may continue to protect the downside, but with U.S. interest rates likely to rise this year, large gains could be difficult. Range trading may therefore be the better short- and medium-term strategy. Resistance is at $4,150, $4,200, $4,300, $4,400 and $4,500, while support is at $3,950, $3,900, and $3,800.

Crude Oil

WTI crude oil rose sharply for a second consecutive week after negotiations between the U.S. and Iran broke down. However, the significant rise in oil prices may encourage the U.S. to return to negotiations and reduce tensions to protect the economy. Looking for selling opportunities after any positive developments may therefore be the better strategy this week. Resistance is at $95, $100 and $105, while support is at $80.00, $75.00, $67.50, $65, and $60.

Bitcoin

Bitcoin briefly rose above resistance at $65,000 early last week, but weaker risk appetite as stock markets fell pushed the market slightly lower by the close. The 10-day moving average now suggests that the recent uptrend has ended, so returning to a range-trading strategy may be the better approach in the short term. 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: Japan Coincident Indicator, U.S. Durable Goods Orders
Tuesday: U.S. OPEC Meeting and CB Consumer Confidence
Wednesday: Australia CPI, U.S. Fed Interest Rate Decision
Thursday: Australia Building Approvals, E.U. GDP and Unemployment Rate, U.K. BoE Interest Rate Decision, U.S. Core PCE Price Index and GDP
Friday: Japan Tokyo Core CPI, Unemployment Rate, Industrial Production, Retail Sales and BoJ Interest Rate Decision, Australia PPI, U.K. Nationwide HPI, E.U. CPI, U.S. Employment Cost Index, Chicago PMI and Michigan Consumer Sentiment

Markets will focus on central bank meetings this week. The Fed, Bank of England and Bank of Japan are expected to keep interest rates unchanged, but their comments could still cause large market moves. Markets now see an 82% chance of a U.S. rate rise in September, up from less than 53% a week ago. U.S. durable goods orders will also be important, while another rise in WTI crude oil could increase inflation worries and put pressure on stock markets.