Markets started last week a bit cautious but slightly positive. There was hope that tensions in Iran might ease, which helped stocks move a little higher. At the same time, the U.S. dollar weakened slightly as risk sentiment improved.
Midweek, sentiment improved more after news of a two-week ceasefire and further talks. Oil prices dropped back below $100, global equities moved higher, and the dollar weakened further. While the situation is not fully resolved, this progress reduced short-term risk.
Economic data showed some impact from earlier higher oil prices. U.S. inflation stayed around 3%, and consumer sentiment fell on concerns about rising costs. Gold remained supported, and USD/JPY again failed to break above 160, but is still holding at high levels.
Markets This Week
U.S. Stocks
The Dow Jones saw strong gains last week as markets reacted positively to the two-week ceasefire in Iran, raising hopes that the conflict may be nearing an end. While there are already signs that higher oil prices are starting to impact the economy, investors are hoping this will be short-term. However, there is still a risk that oil prices remain elevated for longer, which could limit further upside in stocks. As a result, the market may struggle to continue higher this week and could trade sideways in a wide range, with traders closely watching developments in negotiations and movements in oil prices. Resistance levels are at 48,500, 49,000, 49,600, and 50,000. Support is seen at 47,000, 46,000, and 45,000.
Japanese Stocks
Following the ceasefire news, Japanese stocks moved higher and closed near weekly highs, supported by a weaker yen and stronger U.S. equities. However, in the short term, the Nikkei looks slightly overbought, so a pullback early in the week is likely. Further upside will depend on oil prices falling more, as high energy costs remain a concern for the Japanese economy. Overall, the market may move sideways to slightly lower this week as traders continue to watch oil prices and global developments closely. Resistance is seen at 58,000, 58,500 and 60,000, while support is at 55,000, 54,000, 52,500, and 52,000.
USD/JPY
Resistance at 160 remained strong throughout last week, with the pair unable to break higher. Following the ceasefire news, USD/JPY dropped quickly to around 158 midweek as the yen strengthened on improved risk sentiment. However, toward the end of the week, the yen weakened again. U.S. inflation staying above 3% and higher oil prices make it difficult for the Bank of Japan to raise rates, keeping the interest rate gap between the U.S. and Japan wide. This helped USD/JPY move higher again into the close. The 10-day moving average has started to turn slightly lower, and with 160 still acting as strong resistance, trading the 158–160 range remains the preferred short-term strategy. Resistance is at 160.00, 160.50, 162, and 165, while support is seen at 158.50, 158.00, and 156.50.
Gold
Gold continued to move higher last week, supported by a weaker U.S. dollar as WTI prices fell. The move higher came in relatively quiet market conditions, but the trend remained steady throughout the week. The 10-day moving average is pointing higher, showing that short-term momentum is positive. For now, the preferred approach is to look to buy dips, with gold likely to continue testing higher levels. Resistance is at $4,800, $4,850, $5,000, and $5,100, while support is at $4,600, $4,500, and $4,400.
Crude Oil
WTI fell back below the $100 level by the end of last week after the ceasefire news in Iran. Prices dropped quickly midweek as traders sold on expectations that Trump is pushing to end the war before high oil prices significantly damage the U.S. economy. Negotiations are likely to continue, which should keep volatility high, but further large gains look less likely in the short term. Overall, expect WTI to trade sideways to lower this week in volatile conditions, creating trading opportunities. Resistance is at $100, $110, $120, $125, and $130, while support is at $90, $80, $75, $70, and $67.5.
Bitcoin
Bitcoin benefited from improved risk sentiment following the Iran ceasefire, closing the week near the highs of its recent range. It has been trading sideways for a long time, but this may not continue. If tensions in Iran keep easing, there is increasing potential for a breakout above $75,000. Resistance is at $75,000, $80,000, and $85,000, while support is at $65,000, $60,000, and $55,000.
This Week’s Focus
- Monday: U.S. Existing Home Sales
- Tuesday: Australia NAB Business Confidence, Japan Industrial Production, U.S. PPI
- Wednesday: China Trade Balance, E.U. Industrial Production, U.S. NY Empire State Manufacturing Index and Beige Book
- Thursday: Australia Unemployment Rate, China GDP and Chinese Unemployment Rate, U.K. GDP and Industrial Production, E.U. CPI, U.S Industrial Production
- Friday: E.U. Trade Balance
Headlines around the ongoing negotiations in Iran are likely to be the main focus this week, as the situation remains volatile and concerns continue about oil transport through the Strait of Hormuz. There are few major economic data releases, with U.S. PPI being the main highlight. Overall, market direction will be driven more by sentiment around Middle East oil supply than by economic data.
