It’s been a mixed week for the markets. US and Japanese stocks made new highs, but later ended lower as concerns about AI stock valuations weighed on sentiment. SpaceX was also under pressure, falling below its IPO price and ending the week down more than 10%.
Markets now expect at least one increase in US interest rates before the end of the year, despite the recent decline in crude oil prices. Gold briefly fell below $4,000 before recovering, while Bitcoin continued to move lower.
The USD/JPY pair continued to test higher levels as US economic data remained strong. GDP and durable goods orders beat expectations, while core personal consumption expenditures inflation was in line with expectations but remains elevated. The USD/JPY pair approached the 162 level several times, but the Bank of Japan did not intervene. Crude oil prices fell as negotiations continued, with traders focused on the return of oil supplies from the Middle East.
Markets this week
US stocks
While technology stocks have come under pressure, the Dow Jones Index was able to reach a new record high last week, supported by lower crude oil prices and the continuation of its bullish technical trend. However, the index ended the week near the 10-day moving average, indicating slowing momentum. This week, short-term selling opportunities may be more attractive if the Dow falls below or rises above the 10-day moving average very quickly. Resistance levels are at 52,500 and 53,000. Support is 51000, 50000, 49500, 49000 and 48500.
Japanese stocks
Further declines in crude oil prices helped the Nikkei index reach a new record high at the beginning of the week. However, concerns about high valuations for AI-related stocks in Japan, Korea and the US later weighed on sentiment, pushing the index to close below the 10-day moving average by the end of the week. With the market ending the week on a bad note, after such a strong rally this year, more losses could be seen this week. If the Nikkei remains below the 10-day moving average, looking for short-term selling opportunities may be the better approach. Resistance levels are located at 71,000, 72,000, 73,000, 74,000, and 75,000, while support levels are located at 68,750, 68,000, 66,500, and 65,000.
USD/JPY
Better-than-expected US economic data and rising expectations for at least one increase in US interest rates helped the USD/JPY pair test the 162 level several times last week. The threat of intervention to support the yen remains, but the wide interest rate gap between the US and Japan continues to keep the dollar strong. The uptrend is still in place, so without intervention, buying on weakness may continue to work in the short term. However, medium-term traders may look for selling opportunities around the 162 level, anticipating increased risk of Bank of Japan intervention at these levels. Resistance is located at 162.00, 165.00, while support is located at 161.00, 160.50, 160.00, 159.00, 158.00, 157.00, 156.00, 155.50, and 155.00.
gold
Gold fell below the $4,000 level mid-week as US inflation expectations remain high, despite the recent decline in crude oil prices. Prices recovered towards the end of the week, but the broader downtrend remains strong as the US dollar continues to strengthen. For now, selling aggressively still looks like the better short-term strategy unless gold can move back above the 10-day EMA and build stronger upward momentum. Resistance is located at $4,200, $4,300, $4,400, $4,500, $4,600, and $4,665, while support is located at $4,000, $3,900, and $3,800.
Crude oil
The resumption of crude oil supplies from the Middle East pushed West Texas Intermediate crude lower again last week, with prices moving closer to levels seen before the Iran-US conflict. Negotiations on terms for ending the conflict are still ongoing, but markets appear to expect a positive outcome. The short-term trend remains weak, with the 10-day moving average indicating a clear decline. However, support remains near $70, so trading in a range between $70 and $75 could provide opportunities this week. Resistance is located at $75, $85, $90, $95, and $100, while support is located at $70, $67.50, and $65.
Bitcoin
Bitcoin failed to break the $65,000 resistance level, which encouraged sellers to return and push prices towards the bottom of the recent range. The 10-day moving average is now pointing lower again, indicating the potential for further decline 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.
Focus for this week
- Monday: Japanese retail sales and building orders
- Tuesday: Japan Unemployment Rate and Industrial Production, China Manufacturing PMI, UK GDP, S&P/CS HPI Composite, Chicago PMI, CB Consumer Confidence
- Wednesday: S&P Global Manufacturing PMI in Australia and building approvals, Tankan Large Manufacturing Index in Japan, S&P Global Manufacturing PMI in the EU, Eurozone HCOB Manufacturing PMI and CPI, S&P Global Manufacturing in the US
- Thursday: Australian trade balance, EU unemployment rate, US non-farm payrolls report and factory orders
- Friday: Australia’s Global Services PMI, Japan’s Global Services PMI, EU Eurozone Services PMI, UK’s S&P Global Services PMI, US Independence Day holiday
The trading week will be short due to the US Independence Day holiday on Friday, with US employment data on Thursday as the main event. Traders will be watching whether crude oil continues to retreat toward levels seen before tensions in the Middle East began, and whether stocks can remain near recent highs or face further pressure from concerns about AI valuations. Gold is also likely to remain in focus, with volatility expected around the $4,000 level.
