Nick Goold
Dow Jones Index
The past week saw the Dow fall, primarily driven by investor responses to hawkish predictions from the Federal Reserve's recent assembly and an uptick in U.S. Treasury yields. The Fed's stance proved significant as there was little other economic news. The central bank retained its short-term lending benchmark, but the forecasted rates for 2024 and 2025 were surprisingly elevated. With 10-year yields reaching a 16-year high and the Federal Reserve's enduring high stance, equities' allure has diminished. Additionally, Goldman Sachs has shifted its anticipated timing for a Fed rate cut, now eyeing the fourth quarter of 2024.
The forthcoming week could be volatile with several U.S. economic data releases, highlighting the USD GDP, Durable Goods, and Friday's inflation data. Price action at the start will be critical for market watchers; should the market fail to bounce back above the 34,000 mark, we might observe a softening in market sentiment, potentially driving the Dow towards its next support level at 33,600.
Short-term traders could find a high-risk reward buying opportunity if the Dow exceeds 34,000. Conversely, selling becomes an option if the market rises to the 10-day moving average.
Resistance: 34600, 35000, 36000, 36500, 37000
Support: 33610, 33000, 32550, 31750
Nikkei 225 index
Last week, the Nikkei tracked the Dow's descent, influenced by the U.S. Federal Reserve's stance on prolonged high interest rates. Though significant, this fall in the Nikkei is not surprising, given the market's rise since August. Concurrently, the Bank of Japan (BoJ) retained its monetary policy, disappointing those hoping for a shift from negative interest rates. Finance Minister Shunichi Suzuki signalled readiness to address currency volatility, acknowledging last year's yen purchasing and U.S. dollar selling as moderately effective.
The BoJ reaffirmed its commitment to roll out additional stimuli if necessary, given the lack of steady inflation paired with wage growth. Data revealed that Japan's core CPI increased by 3.1% year-on-year in August, slightly outpacing expectations. However, core inflation has slowed, attributed mainly to government interventions reducing energy prices.
The strong USDJPY is poised to bolster the Nikkei for the upcoming week. Given the current market environment, traders are advised to consider range trading between 32,000 and 33,000 as a viable strategy.
Resistance: 33000, 33375, 34000, 35000
Support: 31650, 30800, 30500, 30000
