Solid Goold Trading

Monday’s Edition

With Nick Goold

The Japanese yen was the biggest mover last week. The yen strengthened as markets became more confident that the Bank of Japan could raise interest rates soon. There was also some speculation that the BoJ could raise rates faster than previously expected. Japan’s Finance Minister Satsuki Katayama said authorities were continuing to watch the yen closely.

Oil prices rose at the start of the week as concerns about supply increased. This also increased concerns about inflation. Fed Governor Christopher Waller later said he could support keeping U.S. interest rates unchanged if inflation continued to fall. This pushed the U.S. dollar lower.

U.S. employment data was much stronger than expected. The economy added 162,000 jobs in August, compared with expectations of around 55,000. The U.S. dollar initially rose after the report but later gave back its gains, while gold fell sharply.

Markets This Week

U.S. Stocks

Range trading continues in U.S. equities as high WTI crude prices and concerns about higher long-term U.S. interest rates weigh on the market. With U.S. markets closed on Monday, trading could remain quiet and range-bound for most of the week. Attention will then turn to important U.S. inflation data on Thursday and Friday, which could lead to a larger market move. Resistance levels are at 53,750, 54,000, 54,500, 55,000 and 56,000. Support is seen at 52,700, 51,500, 51,000 and 50,000.

Japanese Stocks

The Nikkei 225 moved slightly lower last week as markets priced in a possible Japanese interest rate hike this month, with some concern that the increase could be larger than expected and followed by further rate hikes. However, losses were limited after the market recovered on Friday. The 10-day moving average has now flattened, suggesting range trading with a slight downside bias this week. Resistance is at 66,000, 67,500, 69,500, 70,000 and 71,000. Support is at 64,000, 63,000 and 62,000.

USD/JPY

USD/JPY fell significantly last week as markets expected more aggressive Japanese interest rate hikes to fight inflation, while the possibility of further intervention to support the yen also encouraged selling. A lower chance of a U.S. interest rate hike added to the downward pressure. However, support held around 155.00, which remains an important level. USD/JPY could recover early this week if it moves back above the lower Bollinger Band. Resistance is at 157.00, 158.00, 159.00, 160.00 and 161.00, while support is at 155.00, 154.00, 152.50, 152.00 and 150.00.

Gold

Gold ended the week close to unchanged after volatile trading. Higher WTI crude oil prices initially pushed gold lower, before comments from Fed Governor Waller suggesting inflation was easing helped prices recover. However, stronger-than-expected U.S. employment data triggered another sharp selloff. Resistance held around the 10-day moving average, which is now pointing lower, suggesting gold could test lower again this week. Resistance is at $4,500, $4,600, $4,650, $4,700, $4,775, $4,900 and $5,000, while support is at $4,350, $4,300, $4,225, $4,200, $4,125 and $4,100.

Crude Oil

WTI crude oil moved higher last week as restrictions on oil supplies through the Strait of Hormuz continued. Prices are now close to the July highs and the uptrend remains strong. Without progress in negotiations, WTI could test $100 in the coming weeks. However, buying closer to the 10-day moving average may offer better opportunities than buying at current levels. Resistance is at $95, $100 and $105, while support is at $85, $80, $75, $67.50, $65 and $60.

Bitcoin

Worries about the value of the U.S. dollar saw Bitcoin test its recent highs last week as traders continued to return to the market. Many are now looking for a move toward $100,000 in the coming months. Bitcoin has held most of its recent strong gains, suggesting another test higher is possible this week. Resistance is at $82,000, $85,000, $90,000, $95,000 and $100,000, while support is at $75,000, $65,000, $62,000, $60,000, $55,000 and $50,000.

This Week’s Focus

Monday: U.K. Lloyds House Price Index, E.U. GDP, U.S. Holiday
Tuesday: Japan GDP and Current Account, Australia NAB Business Confidence
Wednesday: China Trade Balance, Japan Reuters Tankan Index, China CPI and PPI, U.S. Redbook
Thursday: E.U. ECB Monetary Policy Statement, U.S. PPI and Existing Home Sales
Friday: Japan PPi, U.K. GDP and Industrial Production, U.S. CPI and Michigan Consumer Sentiment

The U.S. holiday on Monday will likely mean a quiet start to the week. The ECB is expected to raise interest rates as inflation remains high, with markets paying close attention to its comments on the inflation outlook. U.S. CPI and PPI will be the main data releases of the week as traders try to judge the chance of a U.S. rate hike later this month. Oil will also be important as WTI moves closer to $100. The yen will remain in focus, with the risk of further weakness if the recent change in longer-term market sentiment continues.