A sector rotation took centre stage in the US stock market on Tuesday, 1 July, as investors pulled out of mega-cap technology stocks. The Nasdaq 100 slid -0.90%, underperforming significantly, while the Dow Jones Industrial Average rose 0.9% for its fourth consecutive gain, closing at 44,495—just 1% shy of its all-time intraday high of 45,074 from December 2024.
US Senate Vote Pressures Tech Giants
The sell-off in tech was triggered by the Senate’s approval of President Trump’s US$3.3 trillion tax and spending cut package. The legislation included the rejection of a proposal that would have limited individual US states from regulating artificial intelligence, delivering a blow to tech giants such as Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Nvidia (NASDAQ:NVDA).
Fed and BoJ Hold Cautious Policy Stance
Speaking at the ECB Forum on Central Banking, Fed Chair Jerome Powell maintained his cautious “wait and see” stance on rate cuts, drawing further criticism from President Trump. Similarly, BoJ Governor Kazuo Ueda reiterated that the central bank will wait for more data, particularly around inflation and tariff impacts, before tightening further.
While the BoJ left its policy rate unchanged at 0.5% in June (a 16-year high), markets still anticipate one more 25-basis-point hike in Q4.
US Dollar Weakens Further, But Pace Slows
The US dollar extended its losing streak to seven sessions on Tuesday, though at a slower pace, with the US Dollar Index down -0.1%. In today’s Asia session, the greenback is trading flat overall, registering minor gains against the euro (+0.08%) and yen (+0.14%), while holding steady against the pound and Australian dollar.
Asia Equities Mixed; Nikkei Lags on Tariff Fears
Asia Pacific markets opened mixed. Japan’s Nikkei 225 underperformed with an intraday drop of -0.12%, following an early dip of -1% that tested the 39,390 support level. The slide came after President Trump threatened to raise tariffs on Japanese exports to 30%-35%, up from a proposed 24%, as trade negotiations falter ahead of the 9 July reciprocal tariff deadline.
Meanwhile, Hong Kong’s Hang Seng Index reopened from a public holiday with a 0.6% intraday gain, and Singapore’s Straits Times Index extended its rally by 0.5%, setting a new all-time intraday high of 4,010.
Gold Holds Gains Above Support Ahead of US Jobs Data
Gold (XAU/USD) continues to consolidate near US$3,340, supported by its 50-day moving average at US$3,318. After a two-day rally that delivered a 2.9% gain, momentum has paused near the 20-day moving average resistance at US$3,360. Traders are now awaiting the US ADP Employment Change report for cues on the next directional move.
Economic Data Releases
Fig 1: Key data for today’s Asia mid-session (Source: MarketPulse)
Chart of the Day – Nikkei 225 Bounces From Support, Bullish Trend Remains Intact
Fig 2: Japan 225 CFD Index minor trend as of 2 July 2025 (Source: TradingView)
The recent minor corrective decline of -3.4% seen on the Japan 225 CFD Index (a proxy of the Nikkei 225 futures) from its 30 June 2025 intraday high of 40,852 to 2 July 2025 intraday low of 39,527 has stalled at an intermediate key support inflection area.
Firstly, the lower boundary of a minor ascending channel has been in play since the last Monday, 23 June low. Secondly, the 50% Fibonacci retracement of the prior steep bullish breakout rally from 23 June 2025 low to 30 June 2025 high. Thirdly, the minor corrective decline of -3.4% may mark the end of a minor corrective wave 4 sequence, and the next possible move on the Japan 225 CFD Index may see the start of a minor bullish impulsive wave 5 sequence based on the Elliot Wave Principle (see Fig 2).
In addition, the hourly RSI momentum indicator has traced out a bullish divergence condition yesterday at its oversold region and staged a bullish breakout above a parallel descending resistance. These observations suggest yesterday’s downside momentum has eased.
Watch the 39,390 key short-term pivotal support for the next intermediate resistances to come in at 40,4040, 40,335, and 40,850/41,050 in the first step.
On the flip side, a break below 39,390 negates the bullish tone for an extension of the minor corrective decline to expose the next immediate supports at 39,145 and 38,850 (pull-back of the former range resistance from 13 May 2025 and close to the 20-day moving average).