Weekly Market Strategy - October 29, 2024 (Tuesday)

Last week had no particularly notable indicators or events, but the House of Councillors election on Sunday was all-consuming. With preliminary predictions suggesting the ruling coalition might not secure a majority, the Nikkei was sold off and USD/JPY was bought last week. Political instability is typically a stock sell and yen sell factor, but the results exceeded expectations with a devastating defeat for the ruling coalition. Last week, US 10-year Treasury yields and the dollar index were consistently bid, and USD/JPY had briefly reached the 153 level, but this result added fuel to the fire, causing USD/JPY to rapidly push through previous highs and eye the 154 level. This trend will likely continue until political stability is restored. The Bank of Japan's decision meeting the day after tomorrow is expected to keep rates unchanged with no possibility of a rate hike.

While US long-term interest rates are surging, FOMC rate cuts are still expected, so gold continues its rally and has updated all-time highs at the 2,760 level! Central bank buying from all over the world except China shows no signs of stopping. However, if the US long-term rate increases continue (I believe they will!), gold's peak is near. The upper limit is probably around the 2,800 level. Long is recommended for the long term, but we don't want to chase it here. There's a strong possibility of a pullback from late December into early next year.

WTI crude oil is collapsing. It was confirmed that Israel's attack on Iran did not target oil facilities, and WTI dropped sharply yesterday to the 67 level, a 6% plunge. Fundamentals remain extremely weak.

In summary, buy USD/JPY on any dips to the 151 level. Last week's short at 151 was instantly liquidated. For gold, take profits at 2,800. Crude oil may fall a bit more, but with the bottom likely near, it's best to stay on the sidelines.