This Week's Market Strategy - July 23, 2024 (Tue)

Federal Reserve Chair Powell's congressional testimony last week, which drew attention, was a cautious statement: "It is not appropriate to cut rates until we have greater confidence that inflation is moving sustainably toward 2%." The impact was limited. The other important indicator was the US Consumer Price Index, which came in at 3.0%, below last month's figure and the lowest level in a year. This caused US long-term interest rates to plummet sharply. The Treasury Department appeared to intervene at this timing, and USD/JPY was sold off sharply from the 161 yen range to the 157 yen range, ending the week. Deputy Finance Minister Kanda said two weeks ago, "If the yen weakens by 20 yen from the start of the year (141 yen), it would be considered rapid yen depreciation." Yesterday's Powell, in stark contrast, made dovish remarks: "preventive rate cuts are possible." Is he mindful of President Trump? A sharp drop to around 152-155 yen seems likely. That would be a buying opportunity!

Gold continued to benefit from falling US long-term interest rates throughout the week, particularly following the US CPI announcement, which also led to continued USD weakness. Gold extended gains and finished the week above 2400 USD. Gold remains bullish long-term on the charts. Awaiting a correction.

WTI crude oil is being supported by signs of strong summer demand. Oil prices traded in an 80-83 USD range last week. Chartwise, it has shifted to an uptrend, and recently the action has been sideways, but with President Trump increasingly likely to take office, he would dramatically boost production volumes—a bearish factor. That said, it's unclear if oil will break below 77 USD. In summary, the USD/JPY rally is on pause and reversing. Buying is recommended around 155 yen. Gold is a long-term buy at 2350 USD. Oil is waiting for a decline, and long positions are recommended in the 78 USD range.