Market Summary for the Week
This week has been quite turbulent. The market’s uncertainty regarding potential yen-buying interventions kept the USD/JPY pair under pressure from the start, and it tested lower levels. Interestingly, even positive U.S. durable goods orders couldn’t give the dollar much support. Meanwhile, gold and silver prices surged earlier, with gold even hitting $5,000 as investors flocked to safer assets.
Things changed on Friday when President Trump nominated Kevin Warsh for the role of Federal Reserve Chairman. Mr. Warsh has a cautious stance regarding early interest rate cuts, which the market seems to appreciate. Coupled with strong U.S. PPI data, this led to a rebound of the dollar and a significant profit-taking wave in gold. Gold experienced a nearly 10% drop on Friday, although it finished the week with only a slight decline overall.
U.S. and Japanese stocks mostly traded in a narrow range this week, ending slightly lower. There was some positive news from Europe, as GDP data came in better than anticipated, providing a bit of support amidst ongoing uncertainty.
This Week’s Market Overview
U.S. Stocks
For U.S. stocks, it was relatively quiet. While encouraging economic data helped lift prices, there was strong selling, signaling that investors remain wary of the broader outlook, especially given rising geopolitical risks. Currently, short-term strategies that focus on selling during peaks rather than chasing breakouts are preferred. Resistance is noted at 49,500 and 50,000, with support levels at 48,500, 48,000, 47,500, and 47,000.
Japanese Stocks
The Nikkei 225 faced pressure at the start of the week due to a stronger yen but managed a slight rebound. Investor sentiment improved with expectations that Prime Minister Takaichi may secure a majority in the upcoming February 8 general election, leading to policies aimed at boosting economic growth. Technical indicators suggest a sideways movement may occur, providing potential for range trading next week. Resistance is at 54,000 yen, 54,500 yen, and 55,000 yen, while support sits at 52,500 yen, 52,000 yen, 51,500 yen, and 51,000 yen.
USD/JPY
The dollar/yen pair experienced a significant drop at the week’s onset as traders reduced long positions amid concerns over potential yen-buying interventions. By midweek, U.S. officials dismissed plans to support the yen, allowing it to recover, aided by better-than-expected U.S. data and Trump’s comments about cautious interest rate cuts. Despite this rebound, the overall trend remains bearish, and many continue to prefer selling back as long as USD/JPY stays under 155.50. Resistance levels are at 155.5, 156.6, 157.5, 158, 159, 159.5, and 160, with support at 153, 152, 151, and 150.
Gold
Gold experienced a spike earlier in the week, reaching record highs above $5,000 due to speculative demand. However, it saw a sharp reversal on Friday as profit-taking kicked in and the dollar strengthened following the Fed chair nomination. The volatility in gold has increased, and it’s currently below its 10-day moving average, indicating a weakening short-term trend. Although the long-term outlook for gold remains positive, short-term fluctuations are likely. Resistance is at $5,000, $5,200, $5,500, and $5,600, while support stands at $4,700, $4,600, and $4,500.
Crude Oil
WTI crude enjoyed a robust week amid uncertainties regarding the situation in Iran and positive U.S. growth data, which fueled speculative buying. The technical indicators seem to be improving, with the 10-day moving average trending upward, suggesting potential further gains. However, selling interest may rise as the price approaches the $66.50 mark, especially if President Trump moves to ease tensions with Iran. Resistance can be found at $66.50, $70, and $75, while support is at $59, $55, and $50.
Bitcoin
Bitcoin continued its rough start to 2025, facing additional selling pressure as it dipped below $85,000. The sentiment took a hit following Trump’s appointment of a new Federal Reserve Chairman, who is perceived to be less aggressive on interest rate cuts. Prices are nearing a support level around $75,000, which might set the stage for a short-term rebound; however, the medium-term outlook still appears bearish. Thus, a bullish sell-off strategy, especially around the 10-day moving average, remains favored. Resistance is at $85,000, $95,000, and $100,000, with support levels at $75,000, $72,500, and $65,000.
This Week’s Focus
- Monday: UK National HPI, EU HCOB Eurozone Manufacturing PMI, UK S&P Global Manufacturing PMI, US S&P Global Manufacturing PMI, ISM Manufacturing PMI
- Tuesday: Australian RBA interest rate decision
- Wednesday: Japan au Jibun Bank Services PMI, EU HCOB Eurozone Services PMI and CPI, UK S&P Global Services PMI, US S&P Global Services PMI
- Thursday: Australian trade balance, BoE interest rate decision, EU ECB interest rate decision
- Friday: Japanese household spending, US non-farm payrolls, Michigan consumer sentiment
With Japan’s general election approaching on February 8, traders will likely focus on gold and both the yen and the Nikkei average, anticipating another week of volatility. It’s expected that both the Bank of England and the ECB will maintain their current interest rates, and much attention will be on how their post-meeting comments are framed. Friday’s U.S. jobs report could provoke a strong market reaction, while further volatility may stem from any signals of a possible interest rate hike from Australia’s central bank.
