Before weekly trading began, markets reacted to the announcement that the U.S. and Iran had reached a framework deal to end the conflict. The reopening of the Strait of Hormuz and the easing of sanctions, allowing Iran to resume oil exports, pushed WTI sharply lower at the start of the week and helped lift equity markets.
The most important event of the week was the first FOMC meeting chaired by new Fed Chairman Kevin Warsh. His comments were seen as leaning toward the possibility of raising interest rates faster than previously expected. This pressured U.S. stocks and pushed USD/JPY above 161, with the pair closing at its highest weekly level since 1986. U.S. economic data also remained strong, with retail sales beating expectations.
In Japan, the Bank of Japan raised its policy rate to 1%, as expected, marking the highest level since 1995. Because the move was already priced in, it had limited impact on USD/JPY. Japanese equities performed strongly, with the Nikkei gaining nearly 7% for the week. Elsewhere, the Bank of England kept its base rate unchanged at 3.75%, while the Reserve Bank of Australia also left rates on hold.
Markets This Week
U.S. Stocks
The Dow reached a new record high as lower WTI crude prices supported risk sentiment, but it finished the week with only modest gains after the FOMC comments suggested U.S. interest rates may rise faster than markets had expected. With the U.S.-Iran conflict moving closer to a resolution, the market may now need fresh positive news to keep the uptrend going. This week, looking for selling opportunities may be the better approach if the Dow rises well above the 10-day moving average or breaks below it. Resistance levels are at 52,000 and 52,500. Support is seen at 51,000, 50,000, 49,500, 49,000 and 48,500.
Japanese Stocks
It was a very positive week for Japanese stocks, with the Nikkei surging to a new record high. The initial rally was supported by the sharp fall in WTI crude prices at the start of the week, while USD/JPY moving above 161 after the FOMC meeting, with no sign of intervention, helped push the index above 70,000. The Bank of Japan’s rate hike to 1% was widely expected and had limited market impact. In the short term, the market looks overbought, so weakness could create short-term selling opportunities. However, for medium-term traders, buying on pullbacks may remain the better approach while the uptrend stays intact. Resistance is seen at 72,000, 73,000, 74,000 and 75,000, while support is at 70,000, 68,750, 68,000, 66,500 and 65,000.
USD/JPY
USD/JPY rose to new highs for the year and moved close to the highs from 2024. The Bank of Japan raised interest rates to 1% as expected, but this had little impact on the yen. After the FOMC meeting, comments from the new Fed Chairman suggested U.S. interest rates could rise faster than expected, pushing USD/JPY sharply higher. This week, traders will be watching for possible intervention from Japan. For now, the uptrend remains strong, but trading may stay nervous at these high levels. Resistance is at 162.00 and 165.00, while support is seen at 160.50, 160.00, 159.00, 158.00, 157.00, 156.00, 155.50 and 155.00.
Gold
Gold started the week higher as the drop in WTI crude oil was seen as reducing inflation pressure and weakening U.S. interest rate expectations. However, the move did not last, and sellers returned after the FOMC meeting as traders raised expectations for higher U.S. interest rates. Gold closed back below the 10-day moving average, keeping both the technical and fundamental outlook negative. A test of the $4,000 support area could be possible in the coming weeks. Resistance is at $4,300, $4,400, $4,500, $4,600 and $4,665, while support is at $4,100, $4,000, and $3,900.
Crude Oil
WTI crude oil started the week sharply lower after the weekend announcement that Middle East crude supplies would resume. Prices remained under pressure throughout the week as news around the negotiations stayed broadly positive. With supply concerns easing and the short-term trend still weak, selling into strength remains the preferred strategy for now. Resistance is at $85, $90, $95 and $100, while support is at $75, $70, and $67.50.
Bitcoin
Bitcoin moved higher at the start of the week as lower crude oil prices improved risk sentiment. However, resistance held, and sellers returned after the FOMC meeting as expectations for higher U.S. interest rates increased. Traders continue to prefer other markets for speculative opportunities, leaving Bitcoin under pressure. With technical indicators now turning more sideways, range trading between $60,000 and $67,500 may be the better approach this week. Resistance is at $67,500, $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: E.U. ECB President Lagarde Speaks
- Tuesday: Japan S&P Global Services PMI and BoJ Core CPI, E.U. HCOB Eurozone Manufacturing PMI, U.K. S&P Global Manufacturing PMI, U.S. S&P Global Manufacturing PMI
- Wednesday: Australia Trimmed Mean CPI, U.S. Current Account, Building Permits and New Home Sales
- Thursday: Australia Unemployment Rate, U.S. Core PCE Price Index, GDP and Durable Goods
- Friday: Japan Tokyo Core CPI, U.S. Michigan Consumer Sentiment
Global interest rate expectations are likely to remain the main focus this week as markets adjust to the possibility that inflation may stay higher for longer. With the yen still under heavy pressure, traders will also be watching closely for any signs of possible intervention from Japanese authorities. The key economic releases will come on Thursday, with U.S. Core PCE Price Index, GDP and Durable Goods data all likely to influence expectations for the Fed’s next move.
