For three trading sessions in a row, the bulls are moving at the price of the USD/JPY currency pair to the upside until the US jobs numbers are announced tomorrow, Friday. This will be the strongest driver of the US dollar pairs for this week’s trading. The rebound gains for the dollar-yen pair brought it to the level of 134.55 before settling around the level of 133.85 at the time of writing the analysis. The rebound came from the support level 130.40, which confirmed the break of the bullish trend.

Expectations of a US interest rate hike continue to support record gains for the US dollar in the currency market. In this regard, James Bullard, President of the Federal Reserve Bank of St. Louis, said he favored a strategy of raising interest rates “from the front,” and reiterated that he wanted to end the year at 3.75% to 4% to tackle the hottest inflation in four decades. “We still have some ways to go here to get to tight monetary policy,” Bullard added in an interview with CNBC. “I’ve argued now that with the hotter inflation numbers in the spring, we should get to 3.75% to 4% this year.” Deciding whether you want to do this at a particular meeting, or another is a great question. I loved the front loading. I think it enhances our anti-inflation qualifications.”

All in all, Fed chairs, including Pollard’s speech this week, emphasized that US inflation at a 40-year high has not yet slowed, and pushed against the perception that the US central bank was heading towards a less aggressive phase of monetary tightening. Last week, Federal Reserve Chairman Jerome Powell cited the FOMC’s forecast that the Fed will raise US interest rates to 3.4% at the end of the year and 3.8% in 2023.

“We’re going to have to see compelling evidence via the headline and other measures of core inflation that all come down convincingly before we’re able to feel like we’re doing enough,” Bullard added. He later added that the Fed may have to keep interest rates “higher for a longer period” to see a broad-based slowdown in price growth.

Financial markets are pricing rate cuts as soon as the first half of 2023, and some investors took Powell’s comments at last week’s press conference as a sign that the Fed could soon become less aggressive. Overall, the Federal Reserve raised US interest rates by 75 basis points for the second consecutive meeting, and Powell said that another increase of this size would be possible in September. He did not provide specific guidance for the future and said that future price increases will be data-driven and will be determined in one meeting after another.

Bullard also said he agreed with Powell’s view that the United States is not in a recession, noting that strong job growth is more convincing than the negative two quarters of GDP seen by some as a sign of slackening. Bullard said he expects growth in the second half of the year. “We’re not in a recession right now,” he added, and “with all the job growth in the first half of the year, it’s hard to say there was a recession.”

Forecast of the dollar against the Japanese yen:

Before the announcement of the number of US jobless claims and US trade balance figures. On the daily chart below, the USD/JPY price is trying to return to the vicinity of the general bullish trend. This may happen if the bulls move in the currency pair towards the resistance levels 134.60 and 136.00, respectively. On the other hand, and as I mentioned in the recent technical analyses, it will be important to break the psychological support level of 130.00 to turn the general trend into a bearish one.

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Ultimately, I’m waiting for some type of deeper flush to get involved in a longer-term “buy-and-hold” type of position.

The Ethereum market rallied nicely on Friday to show signs of life, as we have broken above the $1200 level. That being said, the market looks as if it is going to continue to see a lot of noise, but I think a bounce from here more likely than not will get sold into given enough time. After all, Ethereum is going to go down with the rest of the ship, and although we are oversold at the moment, that is just a reason to go into a bit of a relief rally.

The 50-day EMA sits at the $1700 level and is dropping quite significantly. That’s an area where we could start to see sellers again because there’s no real reason to think that risk appetite is back for the long term. While we have seen the stock market recover quite nicely, the reality is that the positive correlation between crypto and stocks makes for upward pressure in the short term. Ultimately, this is a market that has plenty of sellers above, just as the stock market will. The markets will continue to be noisy, but if you’re patient enough you should get an opportunity to start shorting again.

Eventually, I would anticipate that Ethereum dropped back below the $1000 level, but that doesn’t necessarily mean that it will happen in the next couple of days. The uptrend has a way to go because this is a situation where we have a lot of noise ahead of us, and I think if we are going to turn around and recover, we need to spend more time building a bit of a base than we have. We need to have investors comfortable going along for the long term, which is something that they may or may not be able to say at this moment. The market will continue to be noisy, but I think you will get an opportunity to get this market at sub-$1000 levels. If we were to break above the $2000 level, that would obviously change a lot, because it would double the price right now, and that would be a big turnaround. Ultimately, I’m waiting for some type of deeper flush to get involved in a longer-term “buy-and-hold” type of position.

The “meme coin trade” has been taken out back and shot.

The Shiba Inu coin has rallied about 3% during the training session on Thursday as we continue to see the market try to lift itself up off of its back. Because of this, it is possible that we see a little bit of momentum to the outside, but the 50 Day EMA sits just above, and it does suggest that there could be a bit of dynamic resistance. With that in mind, the next bullish sign would be to see Shiba Inu break above the 50 Day EMA on a daily close, allowing for the market to clear a technical barrier.

On Tuesday, we had seen a huge push higher in this ecosystem, so it does make a certain amount of sense that we would see an attempt to do a bit of follow-through here. That being said, the market is more likely than not going to continue to be bullish, because quite frankly the rest of the crypto markets are negative. Shiba Inu has no real use case scenario at the moment, and as a result, this “meme coin” will probably go the way of the dodo given enough time. Yes, I understand there is the Shiba Army out there, but the Army is getting smaller, and quite frankly hasn’t won a battle in a while.

The 200 EMA is near the 0.00002000 area, so therefore I think that at best you would see a pop to that area. After all, if Bitcoin is struggling to find buyers, then Shiba Inu most certainly will as well. This market continues to move to the downside, seeming ready to test the zero level. Whether or not Shiba Inu even exists in another year is a whole different question, but right now I just don’t see how this thing takes. We would need to see massive risk appetite returned to the crypto market, as well as the rest of the world. The market continues to be one that I would avoid, right along with the rest of crypto. Quite frankly, the smaller coins are in the process of disappearing, and at this point, it’s unknown as to which ones actually will survive. The next year is going to be very crucial for these markets, so pay close attention. The “meme coin trade” has been taken out back and shot.

I’m looking for signs of exhaustion that I can sell into, perhaps off the daily chart.

The British pound initially fell on Thursday but then turned around to break above the 1.22 handle. In fact, by the end of the day, we reached the 1.24 level, exacerbated by the noise around the Bank of England interest rate decision and press conference. At this point, it looks to me like the British pound had been oversold anyway, so a relief rally was probably always coming. I do not look at this as the likelihood of the market changing direction, just that it is trying to find a little bit of balance.

I’m looking for signs of exhaustion that I can sell into, perhaps off the daily chart. Regardless, I have no interest in buying, and I do think that we will continue to see a lot of noisy behavior going forward, with a 1.26 level offering a major resistance barrier. This is backed up by the 50 Day EMA being right there as well, so it is worth paying close attention to this neighborhood. If we were to break above it, then I would have to take a serious look at a swing trade to the upside, but right now it does not look like we have the momentum building up. I think that we are going to run out by the end of the weekend, especially as people will not want to carry a lot of risk over the weekend and wait for some type of negative headline to come in and cause problems. With that being said, I think we probably see quite a bit of pressure before it’s all said and done, especially with Friday being options expiration in so many different markets, that it could cause some noise in the currency markets.

At this point, I would anticipate that a lot of bigger traders will be starting to short this market at the end of the day with smaller positions, to take advantage of the overall longer-term trade. The 1.20 level underneath has offered support, and if we can break down below there, we could go much lower, perhaps opening up the possibility of a move down to the 1.18 level. I think it’s only a matter of time before we get down there. The interest rates in America will continue to put pressure in favor of the US dollar.

For five trading sessions in a row, the price of the GBP/USD currency pair is moving amid upward momentum, with gains to the resistance level at 1.2553 at the time of writing, highest in two weeks. In addition to the continuation of anxiety in the global financial markets, this was not a catalyst for strong gains for the pound sterling.

These moves are peculiar in that dollar weakness comes hand in hand with stagnation in global stock markets: the safe-haven US currency usually tends to outperform in times of nervous investor sentiment. There was low investor sentiment during the last Wednesday and Thursday sessions, sparked by a jump in fears that the US economy may suffer from a marked slowdown.

These fears were raised after US retailer Target issued some poor trading guidance, leading investors to worry that the US economy will slow sharply over the coming months. It may be this dawning realization that US economic exceptionalism is not a cast-iron guarantee, as the prevailing assumption in recent years has been, that has led to a recalibration of the dollar’s position.

Shares of Target plunged 25% last week after the US retailer said rising costs would hurt its annual profit, echoing a warning from rival Walmart. Accordingly, economist Ajay Rajadiaksha of Barclays says: “Earning disappointment from Wal-Mart and Target pushed markets lower amid fears of a consumer-driven recession.” Further decline in US sentiment was led by existing home sales data which showed a decline of 2.4% to 5.61 million from 5.75 million.

Commenting on this, Ian Shepherdson, chief economist at Pantheon Macroeconomics says: “The third straight decline in sales is no accident; Activity is now clearly responding to the drop in mortgage demand, which indicates that bigger declines are coming very soon.”

The drop in mortgage demand is the first clear sign that higher interest rates at the Federal Reserve are beginning to be felt, and with more hikes to come the economy is likely to cool off even more. Accordingly, Dr. Jörg Kramer, chief economist at Commerzbank says, “In the US, a rapid rise in key interest rates threatens to stifle demand and trigger a recession. In contrast, there is less shortage of demand in Europe than in intermediate products and labour. This means that, unlike in the US, there is no risk of a classic recession — with consequences for inflation and financial markets.”

The question now is: Could the forex market finally see the end of the dollar’s rally, which will complete one year in May?

These currencies now include the euro, which appears to have benefited from an intensification of expectations for a 50bp rate hike by the European Central Bank. The minutes of the European Central Bank’s April monetary policy meeting were released last Thursday and showed that Governing Council members were concerned that the rise in inflation expectations could become “disorderly”. This describes a scenario that was an inflationary shock – in this case through higher energy and commodity prices – becoming embedded in the broader economy.

For example, companies can raise the prices of the goods and services they provide, while employees can demand higher wages. Some Council members believe that the ECB cannot wait for real wage developments to confirm rising inflation expectations, so the time to raise interest rates quickly is approaching.

As per the pair’s technical analysis: GBP/USD may be in the process of reversing its downtrend, as the price has completed an inverted head and shoulders on the short-term chart. The pair has yet to breach the neckline around 1.2500 to confirm that an uptrend is on the way.

The 100 SMA has crossed above the 200 SMA to indicate that the trend has turned bullish but lacks strong momentum and that neckline resistance is more likely to break than resistance. This could result in a spike similar to the height of the chart shape, which spans nearly 300 points. Stochastic is also ready to move higher after a slight dip into the oversold territory, indicating that the bullish pressure is about to rise. However, if resistance persists, GBP/USD may fall back to the nearby support areas at the moving averages.

Going to parity is a real threat sometime this year, especially if the global economy continues to slow down the way it has.

The euro rallied just a bit on Monday to show signs of life again, but at this point, it seems that the market is in a strong downtrend. Because of this, the 1.05 level is an area that we need to pay close attention to, as it is a large, round, psychologically significant figure and the area where we had broken down from previously.

When you are in a downtrend like this, it is only a matter of time before you continue to go lower, especially as it takes so much time to break through a trend and change the overall attitude. The area at the 1.05 level is resistance that extends all the way to at least the 1.06 level. Getting through all of that would take a lot of effort, although it is not impossible. With this, I think this is a market that will find plenty of sellers on every rally, especially as the interest rate differential between the two economies is so drastic. As long as that is going to be the case, it does make a significant amount of sense that we would have more demand for the US dollar than the euro.

Furthermore, there is a huge “risk-off” type of attitude around the world, which helps the US dollar strengthen over the longer term. At this point, it continues to be a “fade the rally” type of situation, so even if we did break above the 1.06 level, then I think the 50-day EMA offers resistance, right along with the 1.08 level as well. In fact, we would have to break above the 1.08 level on a daily close to change anything at this point.

Looking at this chart, we have been in a downtrend for quite some time, so I do not see that changing anytime soon and it is likely that we could go to the 1.03 level. If we break the 1.03 level, then it opens up a possibility of moving down to the 1.01 level, based upon the bearish flag that we have just recently broken through. Going to parity is a real threat sometime this year, especially if the global economy continues to slow down the way it has. Ultimately, I do not have any interest in buying.

The market continues to see a lot of indecision.

The DAX has initially pulled back just a bit during the trading session after gapping higher, filling the gap, and then turning right back around. Ultimately, this is a market that looks as if it will test the €14,250 level. Ultimately, if we can break above that little consolidation area, then the market is likely to go looking to the 50 Day EMA above, which of course will attract a certain amount of attention as well. We are in a downtrend, and any rally at this point in time is likely that signs of exhaustion will be jumped upon.

If we were to turn around a breakdown below the hammer from the Thursday session of last week, then it is likely we could go looking to the €13,500 level, perhaps even down to the €13,000 level. I think the DAX is a market that is going to continue to see trouble, and as a result, I think this bounce is more likely than not going to be looked at with a certain amount of suspicion. The 50 Day EMA being broken to the upside could open up a move to the €14,900 level, essentially where the 200 Day EMA is sitting in the same general vicinity.

The market will continue to see a lot of volatility, but ultimately, I think we are getting closer to a definitive decision. If you believe in the idea of a falling wedge being an opportunity, then a break higher could lead to that €14,900 level. On the downside, if we do break down below the massive hammer from last Thursday, I anticipate that the momentum will start to pick up as it will be obvious to most traders out there that things are starting to fall apart again.

Keep in mind that the DAX is highly sensitive to risk appetite in the futures market and of course everything that is going on in the European Union. The energy issue in Germany is going to continue to be a major issue going forward, so you have to pay close attention to those noisy headlines as well. At this point, I think this is a market that continues to be noisy, so pay close attention to signs of exhaustion if and when they occur. The market continues to see a lot of indecision.

It is not until we break above the 1.12 level that I would consider buying this market.

The Euro initially rallied during the trading session on Wednesday, but then pulled back a bit from the highs. We had a Federal Reserve meeting and announcement during the day, so it is not a huge surprise to see that things were a bit volatile. Ultimately, this is a market that still sees a lot of resistance above, so I think is probably only a matter of time before we start selling again.

The 1.11 level above is the beginning of significant resistance to the 1.12 level, and then of course we have the 50 Day EMA drifting down below it. Because of this, I think it is only a matter of time before we see the sellers come back into the picture. Any signs of exhaustion will more than likely be jumped upon, and I do believe we have further to go to the downside. After all, the German ZEW shows just how dire the attitude is in the European Union, as it came out at -39 instead of the expected +5. Business confidence falling like that is not a good sign.

There are concerns about inflation and of course the war in Ukraine, so it will continue to be a bit of a drag on the Euro in general. The market falling from here could open up the possibility of a move down to the 1.09 level, and then the 1.08 level. If we break down below the 1.08 level, the market could then go looking towards the 1.05 level. Regardless, we are most certainly in a downtrend and there is no reason to try to fight it.

I believe that simply being patient enough to find “cheap dollars” will be the way going forward, as there are a lot of concerns when it comes to the EU, and of course, there is a lot of space between the interest rates of the two currencies. The interest rate differential has a lot to do with how currency pairs move, and that of course is going to continue to be one of the biggest influences in this pair. Furthermore, we have a situation where the overall momentum of the market continues to see downward pressure anyway. In fact, it is not until we break above the 1.12 level that I would consider buying this market.