This Week's Market Strategy - August 20, 2024 (Tuesday)

Last week saw continued buying in both the Nikkei and USD/JPY (with a pullback at the start of this week). What was surprising was that the reason for last week's buying was strong U.S. retail sales on Thursday. This shows that market focus has already shifted from Fed rate cuts (already priced in) to U.S. economic conditions. Weakening U.S. economy = USD selling pressure. USD/JPY was bought from just below 146 yen mid-week last week to the middle of 149 yen range, but on Friday it sold off to the early 147 yen range due to dollar selling, closing the week. Yesterday USD/JPY temporarily fell to the 145 yen level. USD/JPY is in a short-term downtrend but appears likely to test higher levels again from late week onwards through next week. However, in the medium-to-long term, the downtrend in USD/JPY is likely to continue at least until around May next year. So, short-to-medium term buy dips, long-term short opportunities?

Gold is updating all-time highs and approaching $2,550. Since gold remains bullish this year, waiting for pullbacks to around $2,400-$2,425 is recommended for long positions.

WTI crude oil is experiencing a sharp pullback as geopolitical risks in the Middle East ease. It fell by $2 to the $73 level yesterday. That said, shorting before Middle East peace is achieved carries high risk, so a bottom is likely near.

In summary: USD/JPY should be sold on rallies medium-term and buy on dips short-term. Dips to around 144.50 yen are long opportunities. Take profits and short around 151-153 yen. Gold should be bought at $2,400-$2,425. For short-term positions, cut losses below $2,300 but hold for medium-to-long term. Crude oil is recommended for longs at $72-75 range. Cut short-term positions below $70.