After last Friday’s sharp sell-off, global markets rebounded strongly this week as risk-on sentiment returned. The USD/JPY resumed its recent uptrend as fears of a renewed U.S.–China trade war eased and Sanae Takaichi was officially sworn in as Japan’s new prime minister. Economists believe her appointment reduces the likelihood of the Bank of Japan raising interest rates anytime soon.
U.S. equities surged to new record highs, led by technology stocks, while Japanese stocks also advanced on optimism that the new administration will pursue policies supportive of economic growth. The latest U.S. Core CPI data showed inflation rose less than expected, further reinforcing hopes that the Federal Reserve will proceed with an interest rate cut at its upcoming FOMC meeting.
Gold, which had been rallying for weeks, finally saw a pullback as profit-taking set in and investors rotated back into risk assets. Meanwhile, Bitcoin rebounded after a brief period of weakness, supported by improved market sentiment ahead of the anticipated Fed rate cut.
Markets This Week
U.S. Stocks
The Dow reached record highs this week as the uptrend continued, helped by lower U.S. inflation, strong tech earnings, and dovish comments from Fed Chair Powell. While some investors worry that the market looks expensive, the trend remains strong, and buying on dips is still the best approach as long as the index stays above its 10-day moving average. Resistance is at 47,500 and 48,000, with support at 46,000, 45,500, 45,000, 44,000, and 43,000.
Japanese Stocks
Following the confirmation of Sanae Takaichi as Japan’s new prime minister, the Nikkei 225 surged to record highs early in the week. The uptrend remains strong, and market sentiment is positive about the outlook under the new leadership. With investors expecting continued policy stability, it’s best to follow the uptrend as the index looks to test the 50,000 level. Resistance is at 50,000円 and 51,000円, while support is at 48,500円, 47,000円, 46,000円, and 45,000円.
USD/JPY
The USD/JPY rose every day last week, returning to this month’s highs as Sanae Takaichi became Japan’s new prime minister, lowering expectations for near-term interest rate hikes. While there are concerns that the yen’s recent weakness may prompt a sudden pullback, the overall uptrend remains intact. Until any signs of intervention appear, it’s best to look for buying opportunities above the 10-day moving average, while staying ready to reassess after the upcoming Bank of Japan meeting, which could hint at a stronger willingness to raise rates. Resistance is at 153, 153.3, and 154, while support is at 151, 150, and 149.
Gold
Gold finally saw a down week after its strong two-month rally, as investors took profits following recent large gains. Although the decline was sharp, it remains relatively small compared to the overall rise. Prices steadied toward the end of the week, and with U.S. interest rates falling and the 10-day moving average still trending higher, the broader uptrend may not be over yet. In the short term, range trading appears the best approach to take advantage of current volatility. Resistance is at $4,200, $4,300, and $4,400, while support stands at $4,050, $4,000, and $3,950.
Crude Oil
New sanctions on Russian oil exports lifted WTI sharply this week, breaking the recent downtrend as hopes for lower U.S. interest rates supported the market. However, the rise may be short-lived since worries about U.S. economic growth remain. With strong resistance around $65, prices could move lower again this week. Resistance is at $65, $66.50, $70, and $75, with support at $60 and $55.
Bitcoin
Bitcoin held support last week as improved risk sentiment helped stop further speculative selling. After the sharp drop from record highs earlier this month, the market remains uncertain and is waiting for fresh news to drive new buying interest. Volatility is still high, making range trading the most practical way to find short-term opportunities. Resistance is at $115,000, $120,000, and $125,000, while support stands at $105,000, $100,000, and $95,000.
This Week’s Focus
- Monday: U.S. Durable Goods Orders and New Home Sales
- Tuesday: Japan BoJ Core CPI, U.S. CB Consumer Confidence
- Wednesday: Australia CPI, U.S. Fed Interest Rate Decision
- Thursday: Japan BoJ Interest Rate Decision, E.U. GDP, Unemployment Rate and ECB Interest Rate Decision, U.S. GDP
- Friday: Japan Tokyo Core CPI and Industrial Production, U.S. Core PCE Price Index and Chicago PMI
It’s a big week for global markets, with three major central banks set to announce monetary policy decisions. The Federal Reserve is widely expected to cut the fed funds rate by 0.25% as signs of a weakening U.S. labor market grow, while the Bank of Japan is expected to keep rates unchanged. The European Central Bank is also likely to hold steady, though markets will be watching closely for comments following each announcement. Key U.S. data releases include Durable Goods Orders early in the week and GDP figures on Thursday, both likely to guide expectations for future policy. Investors will also be watching whether the recent sell-off in gold continues and if U.S. equities face profit-taking after their record highs.
