Weekly Market Strategy - May 21, 2024 (Tuesday)

The US inflation rate that drew attention last week came in at 3.4%, below expectations of 3.5%, and core inflation also declined from 3.8% last month to 3.6%. Additionally, retail sales significantly underperformed expectations, coming in at 3.0% versus the expected 3.6%! This result was a surprise! Just when inflation acceleration was expected, cold water was poured on it. Given this, interest rate cuts this year might only happen once. US long-term interest rates fell sharply, and USD/JPY started declining rapidly. However, USD/JPY has shown resilience, rebounding upward from the mid-153 yen level.

USD/JPY is currently in the early 156 yen range. From here, a rise to around 158 yen is possible, but anything higher will probably be difficult. "Why?" When it approaches 160 yen, a third intervention might occur. Additionally, Japan's 10-year interest rate has risen to just below 1% for the first time in 11 years.

Gold from last week through yesterday reacted to FRB observations of interest rate cuts this year and reports of Iran's President Raisi dying in a helicopter accident (?), updating all-time highs at 2,450 dollars. Since gold remains biased upward, there is no change to the long-term long strategy if there is a pullback. However, will it drop to 2,200 dollars??

WTI crude oil last week saw crude inventories continuously declining and Iran's presidential helicopter crash temporarily push it slightly above 80 dollars, but momentum faltered. Is the market waiting for the OPEC+ meeting on 6/1?! On a medium to long-term basis, I expect the downtrend to continue for another month or so.

In summary: buy USD/JPY up to 158 yen, buy gold below 2,200 dollars, and look for short-selling opportunities in crude oil in the near term.