Market Sector Scanner: U.S. Bond Buybacks Surprise Market Ahead of Wednesday Data
Markets reacted strongly as the U.S. surprisingly doubled bond buybacks, weakening the dollar while lifting gold and Bitcoin. Stocks fell due to high yields and U.S.–Iran tensions. All eyes now shift to Wednesday's U.S. economic data and Jackson Hole for interest rate clues.
Gold rose sharply after the U.S. Treasury announced plans to double the size of its long-term bond buybacks. The move supported bond prices and weakened the U.S. dollar, helping gold move higher. Bitcoin also benefited, breaking out of its recent range and rising around 20%. Meanwhile, U.S. and Japanese stocks fell as investors became more cautious about high bond yields and U.S.–Iran tensions. WTI crude oil also rose on concerns about possible new U.S. sanctions on Iran, which could increase costs for Japanese businesses. The Fed also warned that another rate hike may be needed if inflation remains high.
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Market Outlook
Forex Market
USD/JPY
Last Week Recap
The surprise move by the U.S. government to increase its bond purchases pushed USD/JPY lower midweek, as concerns about the long-term value of the U.S. dollar returned.
Technical Picture
The weekly close back below the 10-day moving average, combined with nearby resistance at the upper Bollinger Band, could make further gains difficult without strong U.S. economic data.
Outlook This Week
USD/JPY could trade sideways to lower this week ahead of important U.S. inflation and growth data on Wednesday, which could provide the next direction for the market.
GBP/JPY
Last Week Recap
GBP/JPY had a strong week, with the British pound benefiting from concerns about the value of the U.S. dollar following the increase in U.S. government bond purchases.
Technical Picture
The short-term uptrend was confirmed as prices moved higher from the rising 10-day moving average. GBP/JPY has now recovered almost all of the losses caused by last month's intervention to support the yen.
Outlook This Week
With GBP/JPY back near pre-intervention levels, the market could consolidate and trade sideways for much of this week. A move back toward the rising 10-day moving average could provide a potential buying opportunity for short- and medium-term traders.
EUR/USD
Last Week Recap
Better-than-expected Eurozone economic sentiment and manufacturing data supported the euro, while the surprise increase in U.S. government bond purchases led to strong buying of EUR/USD. The pair finished the week with a large gain.
Technical Picture
The short-term uptrend remains strong. However, with EUR/USD closing back below the upper Bollinger Band, the market looks overbought in the short term and could move lower.
Outlook This Week
Last week's move could be significant for the longer-term trend, but there may be a short-term selling opportunity early this week as traders look for a move back toward the 10-day moving average ahead of Wednesday's important U.S. economic data.
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Equities
U.S. Stock Market
Last Week Recap
The Nasdaq moved lower last week as the market searched for its next direction during quieter summer trading. Higher oil prices and concerns about AI stock valuations encouraged selling.
Technical Picture
The Nasdaq closed back below the 10-day moving average, which is now pointing sideways. With prices also near the middle of the Bollinger Bands, the technical picture suggests sideways trading in the short term.
Outlook This Week
There is no strong short-term trend at the moment, so range trading could be the preferred strategy as markets approach the end of summer. For medium-term traders, the downside risk looks greater, particularly if the Nasdaq struggles to move back above the 10-day moving average.
Commodities
Gold
Last Week Recap
The U.S. government's announcement of increased bond purchases helped gold extend its recent strong rise, as traders and investors looked for alternatives to the U.S. dollar to store wealth.
Technical Picture
The move back above the 10-day moving average was a strong bullish signal, with the upper Bollinger Band now acting as the main resistance to further gains.
Outlook This Week
Short-term traders could look for selling opportunities if gold starts to weaken, as a pullback closer to the 10-day moving average looks possible early this week. The medium- to long-term trend remains strong, so longer-term traders may prefer to wait for a pullback to buy rather than sell against the trend.
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WTI crude oil will remain in focus early in the week as the U.S. increases pressure on Iran. Markets will also watch whether gold and Bitcoin can continue their recent strong rises and whether selling pressure on stock markets continues. Attention will then shift to major U.S. data on Wednesday, followed by the Jackson Hole meeting from Thursday, where comments from Fed officials on inflation and interest rates could move markets.
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