Market Sector Scanner: Key Points to Watch: Higher U.S. Inflation Lifts the Dollar, Stocks Face More Downside Pressure

WTI oil moved back above $100 as talks failed to bring a positive result and supply worries continued. U.S. stocks fell toward the end of last week after higher-than-expected CPI and PPI data raised worries about inflation and pushed long-term U.S. interest rates higher. The stronger dollar helped USD/JPY rise, while political uncertainty in the U.K. hurt sterling, causing GBP/USD and GBP/JPY to close near their weekly lows. Gold also fell as the stronger U.S. dollar reduced demand. 

Scan for opportunities on:

• Forex market (major currency pairs)
• Equities
• Commodities (gold)

Forex Market

USD/JPY

Last Week Recap
USD/JPY resumed its uptrend last week after higher-than-expected U.S. inflation data widened expectations for a continued gap between U.S. and Japanese interest rates. The Bank of Japan did not intervene to buy the yen, while some U.S. officials suggested that higher Japanese interest rates would be more effective than direct yen-buying intervention.

Technical Picture
USD/JPY moved easily above the 10-day moving average, which has now turned higher. Last week’s move was driven mainly by fundamental factors, especially U.S. inflation and interest rate expectations, rather than technical signals.

Outlook This Week
The market was surprised by last week’s rise, as many traders expected possible intervention around 158. However, USD/JPY may struggle to move clearly above 160, so selling opportunities near higher levels could be worth watching this week.

GBP/JPY

Last Week Recap
GBP/JPY had a weak week and closed near its lows as concerns grew over a possible change in U.K. leadership. The political uncertainty was negative for sterling, even though U.K. GDP data came in stronger than expected.

Technical Picture
The lower Bollinger Band continued to provide short-term support, but both the band and the 10-day moving average are now pointing lower. Prices are also moving closer to the April lows, keeping the technical picture weak.

Outlook This Week
GBP/JPY may be oversold in the short term, so a small rebound at the start of the week is possible if the U.K. political situation does not worsen. However, selling into strength looks like the better strategy this week.

EUR/USD

Last Week Recap
EUR/USD came under pressure last week after higher-than-expected U.S. CPI and PPI data pushed long-term U.S. interest rates higher. This made the U.S. dollar more attractive and weighed on the euro throughout the week.

Technical Picture
After testing the upper Bollinger Band, EUR/USD quickly reversed lower following the U.S. inflation data. The pair closed below the lower Bollinger Band, while the 10-day moving average is now pointing lower, suggesting the possible start of a downtrend.

Outlook This Week
The weekly close below support around 1.1650, together with ongoing U.S. inflation concerns, suggests weakness may continue. Selling opportunities could be worth watching this week.

Equities

U.S. Stock Market

Last Week Recap
After reaching record highs in the middle of last week, the Nasdaq came under pressure toward the end of the week as concerns about rising inflation outweighed continued optimism around AI-related stocks.

Technical Picture
The Nasdaq fell back from the upper Bollinger Band, suggesting some short-term profit-taking. However, the 10-day moving average is still pointing higher, so the broader uptrend remains in place.

Outlook This Week
After the strong rise over the past month, short-term traders may look for selling opportunities if the market falls below the 10-day moving average. However, medium-term traders may prefer to continue holding long positions as long as the Nasdaq remains above the 10-day moving average.

Commodities

Gold

Last Week Recap
Gold fell last week as the stronger U.S. dollar and higher WTI oil prices put pressure on the market. Rising long-term U.S. interest rates also made gold less attractive, as gold does not offer yield.

Technical Picture
The 10-day moving average is still pointing to range trading conditions. Support held near the lower Bollinger Band and the April lows, but the overall price action remains weak.

Outlook This Week
Gold looks weak and may be close to a larger move, but range trading remains the better approach for now. If the U.S. dollar continues to strengthen, traders should be ready to look for selling opportunities on a break below the April lows.

Markets may stay more volatile than usual this week as traders continue to react to stronger U.S. inflation data, with the U.S. FOMC Meeting Minutes the key event to watch. U.S. equities could come under pressure if long-term U.S. interest rates continue to rise, while gold is close to an important support level. USD/JPY will also remain in focus, as a move back toward 160 could increase the chance of yen-buying intervention.