Renewed tensions between the U.S. and Iran pushed WTI crude oil sharply higher as traders worried about possible disruptions in the Strait of Hormuz. Higher oil prices also weakened the Japanese yen, helping USD/JPY move higher.
U.S. and Japanese stocks fell as investors became more concerned about high valuations in AI companies. The release of Kimi K3, a new open-source model from Moonshot AI, added to these concerns because its performance was close to leading models from Anthropic and OpenAI.
U.S. inflation data was much weaker than expected, reducing expectations of a near-term Fed rate hike. Retail sales were close to forecasts, while consumer sentiment improved as inflation expectations fell. In Japan, the government’s new economic plan also stressed that the Bank of Japan’s independence should be protected.
Markets This Week
U.S. Stocks
The Dow Jones struggled last week, falling around 1% as investors worried that technology stocks had risen too far and higher crude oil prices could weaken market sentiment. The index closed below its 10-day moving average, which has now turned lower and suggests further weakness may follow after the strong gains since April. As market conditions change, selling into strength or trading the short-term range may be a better strategy. Resistance levels are at 53,000, 53,500 and 54,000. Support is seen at 52,000, 51,000, 50,000, 49,500 and 49,000.
Japanese Stocks
The Nikkei 225 fell more than 6% last week, its largest weekly point decline on record. Concerns about high valuations in AI-related companies and the negative impact of higher WTI crude oil prices encouraged further selling. Despite falling nearly 10% in July, the index remains more than 23% higher in 2026, suggesting further losses are possible. Selling into strength near resistance at the 10-day moving average may therefore be the better short- and medium-term strategy. Resistance is seen at 66,500, 67,500, 69,000, 70,000, 71,000 and 72,000, while support is at 63,000, 62,300 and 60,000.
USD/JPY
USD/JPY had a quiet week, testing recent highs despite weaker-than-expected U.S. inflation data. Higher WTI crude oil prices and the lack of Bank of Japan intervention encouraged light buying as traders continued to benefit from higher U.S. interest rates. The pair remains in a slight uptrend, but with strong resistance near 163, range trading may be the better strategy this week. Resistance is at 162.50, 163.00 and 165.00, while support is seen at 161.00, 160.50, 160.00, 159.00, 158.00, 157.00, 156.00, 155.50 and 155.00.
Gold
Gold came under pressure last week as higher crude oil prices increased inflation concerns. However, weaker-than-expected U.S. inflation data encouraged buying and helped prices remain above their yearly lows. With reports of central bank demand below the market, buying on weakness may be the better strategy this week. Resistance is at $4,100, $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 more than 10% last week as renewed tensions between the U.S. and Iran increased concerns about reduced oil supplies. A lack of progress in recent negotiations also raised fears that the conflict could continue longer than expected. The market now looks slightly overbought, so selling after any positive developments in the negotiations may be the better strategy this week. Resistance is at $85, $90, $95 and $100, while support is at $75.00, $67.50, $65, and $60.
Bitcoin
Bitcoin had a quiet week as the market tested resistance near $65,000 and sentiment continued to improve. Buying on weakness while looking for a break above resistance may be the better strategy this week. 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: U.S. Leading Index
- Tuesday: U.K. Unemployment Rate, E.U. ZEW Economic Sentiment, U.S. ADP Employment Change Weekly
- Wednesday: Japan Trade Balance, U.K. CPI and PPI Input
- Thursday: Australia Unemployment Rate, E.U. ECB Interest Rate Decision and Consumer Confidence
- Friday: Australia S&P Global Manufacturing & Services PMI, Japan National Core CPI and S&P Global Services PMI, U.K. Retail Sales and S&P Global Manufacturing PMI, E.U. HCOB Eurozone Manufacturing PMI, U.S. Building Permits, S&P Global Manufacturing PMI and New Home Sales
There are few major economic data releases this week, so the ECB interest rate decision will be the main focus. Rates are expected to remain unchanged, but the ECB may provide guidance on the timing of future rate increases. Developments in the Middle East will also remain important, along with any efforts by Japanese authorities to limit further yen weakness.
