Market Sector Scanner: WTI Continues to Dictate Market Moves as Equities Rise
Easing concerns around the Iran ceasefire pushed oil prices lower last week, which weakened the U.S. dollar and helped equities move higher. Softer U.S. data and lower long-term yields also supported sentiment, while gold stayed firm. With new weekend headlines around the Strait of Hormuz, oil prices and risk sentiment are likely to stay the main market drivers this week.
Easing concerns around the Iran ceasefire helped push oil prices lower last week, which weighed on the U.S. dollar and supported a rise in global equities. Economic data played a smaller role, although softer U.S. PPI, weaker industrial production, lower long-term Treasury yields, and solid U.S. bank earnings all added to the more positive tone. By Friday, reassurance that the Strait of Hormuz would stay “completely open” helped calm markets further, leading to more dollar weakness and a strong finish for stock markets.
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Forex Market
USD/JPY
Last Week Recap
Falling WTI prices and lower long-term U.S. interest rates pushed USD/JPY lower last week. However, buyers returned at lower levels after the Bank of Japan suggested it may delay rate hikes because of concerns about the Japanese economy.
Technical Picture
Bollinger Bands remain narrow, showing that volatility is still limited, while resistance at 160 remains strong. The 10-day moving average is starting to turn lower, which suggests the pair could test support between 157.50 and 158 again.
Outlook This Week
The risk of a move lower is increasing, but for now, range trading still looks like the better strategy. Trading between 157.50 and 160 remains the preferred short-term approach.
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GBP/JPY
Last Week Recap
GBP/JPY reached new highs for the year last week as the U.S. dollar weakened and U.K. GDP came in better than expected. However, the pair gave back some gains toward the end of the week as the yen strengthened.
Technical Picture
The upper Bollinger Band gave a sell signal at the start of the week, helping to ease the overbought conditions. Even so, the 10-day moving average continues to act as support, which suggests the uptrend remains strong.
Outlook This Week
The longer-term outlook remains positive as the 10-day moving average continues to provide support. Buying on dips may still be the better strategy this week.
EUR/USD
Last Week Recap
EUR/USD continued to rise last week as lower long-term U.S. interest rates supported the pair, with falling WTI prices easing concerns about inflation. Weaker-than-expected U.S. economic data also weighed on the dollar, while higher-than-expected European inflation data added further support to EUR/USD.
Technical Picture
The market gave a sell signal on Friday after moving above the upper Bollinger Band and then closing lower. There is also now a gap between price and the 10-day moving average below, which suggests the pair could test lower levels in the short term.
Outlook This Week
The uptrend remains in place, and with tensions in Iran still continuing after the weekend news, buying on dips may still be the better strategy as long as the market stays above the 10-day moving average.
Equities
Last Week Recap
The Nasdaq surged to new record highs last week as easing tensions in Iran helped reduce inflation concerns, while renewed strength in AI-related stocks added further support to the tech sector.
Technical Picture
The strong rise pushed the market above the upper Bollinger Band several times, showing strong upward momentum. At the same time, the Nasdaq remains well above the bullish 10-day moving average, which keeps the broader trend positive.
Outlook This Week
The market looks overbought in the short term, so renewed tensions in Iran over the weekend could lead to some weakness at the start of the week. Volatility may stay high as the market adjusts to these higher levels, so short-term range trading may be the better strategy for now.
Commodities
Gold
Last Week Recap
Falling WTI prices on hopes of a quicker end to the conflict in Iran pushed both the U.S. dollar and long-term U.S. interest rates lower last week, helping gold continue its recent uptrend.
Technical Picture
After the recent quiet trading conditions, the Bollinger Bands are starting to narrow, which suggests volatility could increase soon. The 10-day moving average continues to point higher and is still providing support.
Outlook This Week
Gold looks set to build on its recent gains and could test $5,000 this week, so buying on dips remains the better strategy.
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New weekend headlines about the Strait of Hormuz closing again are likely to keep markets busy at the start of the week and lower hopes that the Iran conflict will end soon. Markets will likely stay focused on WTI price moves and react quickly to any new headlines. U.S. retail sales and consumer confidence will also be important, as traders watch whether higher oil prices are starting to hurt consumers and the wider economy.
