Risk-on sentiment continued to grow last week, with global stock markets hitting new record highs. The main event was the U.S. Federal Reserve cutting its key interest rate by 0.25%, bringing it to the lowest level in three years. However, Fed Chair Jerome Powell surprised investors by saying that more rate cuts are not guaranteed, which caused the U.S. dollar to strengthen.
In Japan, the Nikkei 225 climbed above 50,000 for the first time, supported by hopes for a large economic stimulus from new Prime Minister Sanae Takaichi and expectations that the Bank of Japan will keep interest rates unchanged. This boosted confidence in Japan’s economic outlook and helped drive strong buying in regional markets.
Trade news was also positive as U.S.-China talks led to a draft deal to pause new U.S. tariffs and ease restrictions on Chinese rare earth exports. The European Central Bank also kept rates steady and highlighted signs of recovery in Germany’s economy.
U.S. Stocks
Strong U.S. company earnings and the recent interest rate cut helped the Dow Jones reach new record highs, despite growing concerns about a possible bubble in U.S. equities. The index remains above its 10-day moving average and in an overall uptrend, but after failing to build on recent gains, a short-term pullback looks likely. Selling on a break below the 10-day moving average could offer opportunities for short-term traders, while the medium-term trend remains strong. Key resistance levels are at 48,000, 49,000, and 50,000, with support at 47,000, 46,000, 45,500, and 45,000.
Japanese Stocks
The Nikkei 225 posted another strong rally last week, rising every day as the Bank of Japan kept interest rates low, the yen weakened, and expectations for new government stimulus boosted confidence. While the market looks overbought in the short term, selling at record highs remains risky. The better approach is to wait for a pullback toward the 10-day moving average before buying again. Resistance is at 53,000円, 54,000円, and 55,000円, while support lies at 50,000円, 48,500円, and 47,000円.
USD/JPY
Following the Bank of Japan’s decision to keep interest rates unchanged, the USD/JPY climbed to its highest level since February. Despite some concerns about the rapid pace of yen weakness, there are no signs of intervention, as officials remain cautious that higher rates could harm the economy. The uptrend remains strong, and with the pair now trading above 153, there is little resistance ahead, making buying on dips the best strategy for now. Resistance is at 154.5, 155, and 156, while support is at 153, 151.5, 151, and 150.
Gold
Profit-taking in gold continued last week as prices fell below $4,000, following the metal’s strong rally in recent months. New record highs in U.S. equities and short-term technical indicators turning lower encouraged traders to close long positions after the big rise. In the short term, the market may find support around $4,000, creating range-trading opportunities, but further declines are possible if there is no negative economic news to lift safe-haven demand. Resistance is at $4,200, $4,300, and $4,400, while support stands at $4,000, $3,950, and $3,900.
Crude Oil
WTI couldn’t build on last week’s strength as oversupply concerns and worries about weaker demand from a potential U.S. economic slowdown weighed on prices. While support remains around $60, the market is struggling to rise, suggesting that short-term trading strategies of buying weakness and selling strength may work best for now. Resistance is at $65, $66.50, $70, and $75, with support at $60 and $55.
Bitcoin
Bitcoin came back under pressure last week after markets were disappointed by Federal Reserve Chair Powell’s comments suggesting that another rate cut in December may not happen. Key support at $106,000 held, which is a positive sign, but the market remains under pressure overall. For now, range trading between $106,000 and $116,000 looks like the best strategy this week. Resistance is at $116,000, $120,000, and $125,000, while support stands at $106,000, $100,000, and $95,000.
This Week’s Focus
It’s a relatively quiet week for economic data, with attention focused on whether the current uptrends in equities and USD/JPY can continue or if profit-taking will halt their rise, as seen recently in gold. The main highlight will be the release of the Bank of Japan Monetary Policy Meeting Minutes, which could offer clues on the timing of the next interest rate hike. The Bank of England is expected to keep rates unchanged amid persistent inflation, though markets see about a 30% chance of a rate cut. Meanwhile, gold will need to recover above $4,000 to avoid further selling pressure this week.
