This Week's Market Strategy – July 9, 2024 (Tuesday)

Last Friday's employment data made it clear that the U.S. labor market is finally starting to weaken. Non-farm payrolls came in at 206,000, beating the forecast of 190,000, but falling short of the previous month. The unemployment rate rose to 4.1%, and average hourly earnings growth slowed to 0.3%. Following this, U.S. long-term interest rates plummeted sharply. USD/JPY, which had been bought up close to 162 yen mid-week last week, ended the week in a downtrend. The U.S. dollar index, which has shown strong correlation with USD/JPY, has continued to decline since around Tuesday last week. The 162 yen level is exactly 20 yen higher than the 141 yen level from the start of the year that I mentioned last week, and the market is becoming nervous about whether intervention will occur at this level. Whether there is intervention or not, the Fed seems likely to cut rates, so a sharp decline to around 152-155 yen appears likely. That would be a buying opportunity.

Gold benefited from declining U.S. long-term interest rates throughout the week, and as the U.S. dollar index fell sharply, gold surged and ended the week higher. Last week, gold rose an impressive 60 dollars, or 2.5%, to just below 2,400 dollars. Gold remains in a long-term uptrend, and it may very well break through 2,400 dollars and continue higher.

Friday's employment data suggests the WTI crude oil demand side may weaken. Additionally, the possibility of supply disruption from hurricanes in the Gulf of Mexico has faded into the background, causing crude oil prices to fall sharply yesterday from last week's 84.50 dollars to the 82 dollar range. However, the chart pattern suggests an uptrend reversal. It remains unclear whether prices will break below 77 dollars.

In summary: USD/JPY uptrend is pausing and declining. Recommend buying around 155 yen. Gold is recommended as a long-term buy above 2,300 dollars. Crude oil should be watched for further declines, with the 78 dollar range recommended for longs.