Nick Goold
Dow Jones Index
The Dow Jones Index enjoyed its third straight week of gains on a mixture of weaker inflation and positive growth signals in the US economy. Consumer price increases were at their lowest since March 2021 at 5.3% year on year, and producer prices actually fell in May. Friday saw US retail sales record a 1.6% rise over the past 12 months, along with the University of Michigan's consumer sentiment gauge beating expectations.
The Federal Reserve kept rates unchanged as expected, but there is still the possibility of two more 0.25% hikes by the end of the year. Initially, the Dow dropped over 200 points on the more hawkish stance of the Fed, but comments by Chairman Powell that rate hikes were not imminent and dependent on upcoming economic data saw the uptrend quickly resume.
A quiet week ahead on the economic data front. The week's focus will be Thursday when Fed Chair Powell testifies at the US Senate on the economy and monetary policy. The Dow Jones failed to close above the yearly high on Friday, so the medium-term range conditions remain. Short-term higher levels are likely, so buying weakness ahead of support at the 10-day moving looks to be the best approach this week.
Resistance: 34500, 34590, 35000
Support: 34155, 34000, 33000, 32550, 31750
Nikkei index
The Nikkei 225 Index extended its winning streak for the 10th consecutive week, achieving its longest run since February 2013. This impressive performance was attributed to the Bank of Japan's decision to maintain its accommodative monetary policy, weakening the yen. Foreign investors also flocked to Japan's equity market, purchasing substantial cash shares and futures totaling 1.4 trillion yen ($9.9 billion) in the week ending June 9.
In last week's Bank of Japan meeting, board members kept the negative interest rate and yield curve control program unchanged, diverging from the global trend of other central banks raising rates to combat persistently high inflation. The USDJPY rose to its highest level in 2023, helping the Nikkei index close 4% higher weekly.
There is little resistance following the break of 32,710 last week, with round figures like 34,000 and 35,000 obvious levels for investors to take profit. Volatility will remain high, and the best strategy remains to wait for the market to fall to join the uptrend. Short-term traders could find overbought opportunities to sell as some profit-taking is expected this week from long-term investors.
Resistance: 34000, 35000
Support: 32700, 31650, 30800, 30500, 30000
