Market Sector Scanner: FOMC Minutes and U.S.–Japan Interest Rate Expectations
Markets will focus on the FOMC meeting minutes and economic data from the U.S. and Japan as interest rate expectations continue to change. Softer U.S. data has reduced expectations for a September Fed rate hike, while stronger Japanese data could increase expectations for a Bank of Japan rate increase. Middle East tensions and the risk of further oil supply disruptions will also remain in focus.
It was a relatively quiet week for markets during the summer trading period. U.S. inflation data was slightly softer overall, reducing expectations for higher interest rates, while weaker retail sales and consumer sentiment raised some concerns about the U.S. economy. USD/JPY moved higher early in the week as fears of another Japanese intervention eased, although speculation increased that the Bank of Japan could raise rates in September. U.S. stocks were little changed, Japanese equities continued to recover, and WTI crude oil rose as tensions in the Middle East kept concerns about supply disruptions through the Strait of Hormuz in focus.
Key Events Calendar
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Market Outlook
Forex Market
USD/JPY
Last Week Recap
USD/JPY resumed its recent uptrend as buyers became more confident that the intervention had not changed the fundamental outlook. However, weaker U.S. economic data and growing expectations of a Japanese rate increase in September limited gains toward the end of the week.
Technical Picture
The weekly close above the 10-day moving average, which is now pointing higher, confirms the return of a positive trend. However, resistance from the falling upper Bollinger Band could make buyers more cautious this week.
Outlook This Week
USD/JPY recovered quickly after the intervention, but lower expectations for U.S. interest rate increases could limit further gains in the short term. Range trading may therefore be the preferred strategy this week.
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GBP/JPY
Last Week Recap
Renewed yen weakness and better-than-expected U.K. GDP data supported GBP/JPY last week. The pair benefited further from weaker U.S. economic data and finished near the highs of the week.
Technical Picture
The close above the upper Bollinger Band suggests the market is slightly overbought in the short term. However, the rising 10-day moving average indicates that there is support below the current price.
Outlook This Week
Strength in the British pound and continued yen weakness could support further gains in GBP/JPY. Buying on weakness toward the rising 10-day moving average may be the preferred strategy this week.
EUR/USD
Last Week Recap
Weaker-than-expected U.S. economic data throughout the week, together with more positive Eurozone economic growth data, helped EUR/USD move higher.
Technical Picture
The upper Bollinger Band continues to act as resistance, while the rising 10-day moving average remains bullish and is providing support.
Outlook This Week
The U.S. dollar could remain under pressure this week, with few major U.S. economic releases likely to change the current trend. Buying EUR/USD on weakness may therefore be the preferred strategy this week.
Equities
U.S. Stock Market
Last Week Recap
The Nasdaq had another strong week as investors continued to buy AI-related stocks. Expectations that U.S. interest rate increases could be delayed following weaker economic data also supported the market.
Technical Picture
The 10-day moving average is rising strongly, confirming the positive trend. With some room before the Nasdaq reaches the upper Bollinger Band, there is still potential for further gains.
Outlook This Week
The uptrend remains strong, but after such a large move in a short period, some consolidation is possible this week. Short-term range trading may therefore be the preferred strategy.
Commodities
Gold
Last Week Recap
Gold continued to test higher last week as weaker-than-expected U.S. economic data supported the market through lower interest rate expectations and a weaker U.S. dollar.
Technical Picture
The upper Bollinger Band triggered a sell signal toward the end of the week, which is natural given the strength of the current uptrend. The rising 10-day moving average continues to support the positive trend.
Outlook This Week
The uptrend looks likely to continue this week, but medium-term traders may find better entries by being patient and waiting for a pullback toward the 10-day moving average. With fewer major economic data releases, short-term traders could consider range trading to take advantage of the high volatility.
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While there are not many major U.S. data releases this week, there are still several important events to watch. Japan's GDP and manufacturing data from the U.K. and euro area could move markets. The FOMC meeting minutes will also be important as traders look for clues about a possible U.S. rate hike in September. Middle East tensions will remain in focus, especially if problems with oil supply push crude prices and inflation expectations higher.