• The USD/JPY has fallen a bit during the trading session on Wednesday in an almost exact copy of the previous 24 hours.
• The ¥136 level has offered support, and now it looks as if we are going to continue to see people pay close attention to that area.
• If we continue to see that area hold, then I think it’s probably only a matter of time before the US dollar takes off against the Japanese yen. This makes a lot of sense, considering that the Bank of Japan continues to buy “unlimited bonds” in order to keep the 10-year yield down to 0.25% or lower.

The last couple of days have been relatively quiet as the world awaits the Jackson Hole Symposium to get done. The Friday morning session features Jerome Powell giving a speech at 10 AM Eastern Standard Time, meaning that the world is going to listen to determine whether the Federal Reserve is going to become extraordinarily hawkish, or if they are going to pivot. Wall Street has gotten into its head that the Federal Reserve is going to pivot, but quite frankly they have said multiple times since then that the markets have misread the central bank. In other words, we are playing a game of chicken.

Look For Buying Opportunities

At this point, I think dips continue to offer buying opportunities, especially with the 50-Day EMA underneath and rising. I do think that we eventually get to the ¥140 level because the Federal Reserve is going to be extraordinarily aggressive, as the inflation numbers in the United States measure 8.5% year-over-year. This is more than 4 times what the Federal Reserve aims for, so they will have to do everything they can to beat the economy down in order to drive down demand. As long that’s going to be the case, it’s difficult to imagine a scenario where this pair does anything different unless the Bank of Japan finally gives up its quantitative easing, something that it is not going to do anytime soon. The trend should remain, but the next 24 hours might be a bit quiet as we wait for some type of confirmation. With this being the case, the trend should continue to be followed.

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Every dip should be thought of as a potential buying opportunity.

The USD/JPY has fallen to kick off the trading session on Tuesday, but found enough support near the ¥136 level to turn around and form a hammer. This is a market that looks as if it is ready to go higher given enough time, but we may have a little bit of work to do in the meantime. After all, we have the Jackson Hole Symposium going on, and central bankers from around the world will be speaking. In other words, there’s a really good chance that there will be a lot of headline noise in the short term.

Breaking down below the bottom of the candlestick would make it technically a “hanging man”, but I don’t necessarily think that would be the end of the world. That will more likely than not send this market looking to the 50 Day EMA, and then perhaps even as low as the ¥132 level. It’s not really until we break down below that level that I would be concerned about the overall trend. This is a market that I think will find plenty of buyers between now and then, especially if interest rates continue to climb, like they have been in bond markets, not only in the US but worldwide.

Remember, the Bank of Japan has to worry about rising interest rates on the whole, because they need to keep the 10 year yield at 0.25% or lower. In other words, they need to print currency in order to buy “unlimited bonds.” With that being the case, it makes sense that the Japanese yen will continue to fall, and as a result every dip should be thought of as a potential buying opportunity.

Noises from Central Bank

• Keep in mind that there is a certain amount of a risk appetite play here, but the Japanese yen, although a safety currency, also has this noise coming from its own central bank.
• The US dollar is the world’s favorite safety currency as well.
• We may see this market go higher regardless of what happens next, unless of course there is some type of drastic change in the attitude of the Bank of Japan, something that they have shown very little interest in doing.

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The BTC/USD market has fallen significantly during the trading session on Friday, losing over 7% as the market is now approaching the $21,000 level. The 50 Day EMA has been left in the rearview mirror, and now it looks like we are very likely to see Bitcoin drop down to the $20000 region quite quickly.

• The $20,000 level has a certain amount of psychology attached to it, and it would also cause a lot of noise.
• That’s an area where we had seen a lot of support previously, so that is an area where you would anticipate there should be some buyers based upon value. 
• If we were to break down below that level, it’s likely that the market would probably drop down to the $12,000 level. It is at the $12,000 level that a lot of people believe that the market will bottom.

The $12,000 level is where we broke out from previously, so it would be a complete round trip for what we had done during the last bullish move, and at this point, I think it would not be a huge surprise to see that happen. The $25,000 level had been a major resistance and psychological barrier, and the fact that we have pulled away from it so quickly now, suggests to me that there is going to be some follow-through. After all, the market continues to see a lot of risk appetite being eviscerated, and that is horrible for Bitcoin. After all, Bitcoin is pretty far out on the risk spectrum, and therefore times have to be good in order for Bitcoin to continue going higher.

The size of the candlestick does suggest that we have much further to go, and with that being the case, it’s likely that we will try to see plenty of sellers willing to step into this market at the first signs of exhaustion. I think the US dollar is going to continue to cause major issues, and as long as that’s going to be the case, nothing is going to get in its way, including cryptocurrency. Bitcoin is likely to take a punch in the face over the next couple of weeks, but if we were to turn around and rise above the $25,000 level, it would be a complete change of scenery, opening up a potential move to the $20,000 level.

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I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside.

• The West Texas Intermediate Crude Oil market fell rather hard during the early hours on Monday, crashing into the previous support level of around $87.
• The $87 level has been important, so it’s not a huge surprise that we have bounced from there.
• Ultimately, the market has continued to defend this area, but it is more likely than not going to be an area that will eventually get broken.

Volatility and Downside Ahead

If we do break down below that area, then it’s likely that this market could get hammered, perhaps opening up a move to the $85 level, then followed by the $80 level, an area that obviously has a significant amount of psychology attached to it, and has quite a bit of historical importance as well. That being said, the market continues to see a lot of volatility, and typically volatility means that the market will eventually fall.

When you look around the world, there is a severe concern when it comes to global growth, as it seems to be disappearing. Any lack of growth is almost always shown up as negativity in the oil market, as demand should drop overall. I think that’s what is being priced in right now, so it is most certainly going to continue to be negative. That being said, we have seen a little bit of a bounce, and the volatility of oil will more likely than not continue to be a major factor.

It looks as if the $94 level above should continue to be resistance, and breaking above that would be a pretty strong sign. I don’t necessarily see that happening anytime soon, but it’s something to keep in the back of your mind. As things stand right now, it looks like we are grinding back and forth in order to try and find some type of consolidation pattern, but it most certainly seems to be favoring the downside in general. Because of this, I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside. The US dollar continues to be a very strong currency anyway, so I think it only makes sense that the oil markets will struggle to keep up against that type of massive momentum in the currency market.

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As long as we stay above the ¥132.50 level, not much is changed, and it looks bullish.

• The US dollar initially fell during the trading session on Thursday but found the support level that I had been talking about previously as reason enough to get long.
• The ¥132.50 level has held firm, and now it looks as if the USD/JPY currency pair is trying to go higher again.
• Keep in mind that this pair has been almost solely driven by interest rates, so you will need to keep an eye on the bond markets.

The US dollar has seen interest rates in America drop a bit, which of course has been negative for the greenback. However, we have also seen a little bit of stabilization, and that has helped the Japanese yen. The reason for that is that the Bank of Japan continues to defend the quarter percent peg on the 10-year bond, meaning that if interest rates start rising everywhere, that means that there is a bit of a “knock-on effect” in the Japanese bond market. Looking at this chart, you can see that we had been in a long-term uptrend and as the interest rates in America had been rising, we had seen the Japanese have to print more yen. This has been a perfect setup for this trade, and now it looks like we may continue to see that.

The 50 Day EMA sits above the highs from the trading session on Wednesday, so if we were to break above there, then it’s possible that we could see a bit more bullish pressure at that point as the market would start to see it as momentum building up. At that point, the market is likely to test the highs again, and perhaps even further. I think the ¥140 level could be a possibility, but it probably is going to take a significant amount of momentum to make that happen. I would anticipate a lot of noise, and therefore you will have to be very cautious about your position size. Ultimately, as long as we stay above the ¥132.50 level, not much is changed, and it looks bullish. If we break down below there, then we could be looking at a move all the way down to the ¥127.50 level. Either way, you will have to keep an eye on the bond markets, and interest rates as to where they are going.

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This is a market that I think is worth taking on a day-by-day decision. 

• The USD/JPY currency pair fell a bit Friday, reaching down to the ¥133 level.
• There is a significant amount of support just below as well, so I think it’s only a matter of time before buyers come back in and pick up this market.
• At this point, I’m looking for a bit of a bounce in order to show signs of getting back in. Then I’d be willing to buy this pair because of the interest rate differential.

The Interest Rate Differential

Granted, interest rates in the United States have been falling, but they’re still significantly above where we see them in Japan. I’m waiting to see stabilization in those rates, and then you will more likely than not see a turnaround in this pair. Ultimately, the market is likely to see a lot of volatility, and it is worth noting that just below the current area we have a ¥132 level offering significant support. The 50-day EMA is just above, offering a bit of short-term technical resistance.

The pair has been in a massive uptrend for ages now, and it’s possible that I will have to wait a bit in order to find enough stability to get long again. I have no interest in shorting this market, at least not quite yet. We would have to see a major change in the interest-rate situation to think that this trend is over. Granted, this has been a significant breakdown, so that possibility is on my radar.

I think it’s more likely than not that we will bounce heading into next week. The market will continue to see the ¥140 level as a potential target, but it’s going to take some effort to get there. On the other hand, if we were to break down below the ¥128 level, I think it would hint to a major trend change. In that scenario, we would probably see the US dollar fall everywhere, which is something that we do not see quite yet. In other words, you have to pay attention to plenty of other markets in order to make the play here. Ultimately, this is a market that I think is worth taking on a day-by-day decision. The daily chart and how we close every day will be my guide.

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This pair does tend to be very choppy and sluggish most of the time, so you have to simply be set up in the right direction and wait for the market to make the move.

The euro initially fell hard on Friday, but found enough buyers underneath the 1.04 level to turn things around. By doing so, it looks as if it is hanging on for dear life in this area, perhaps getting ready to bounce yet again. If it does, I suspect that there will be plenty of sellers above to get involved and start shorting it at the first signs of exhaustion.

On that bounce, I would suggest that the 1.05 level could be an area of trouble, followed by the 1.06 level which should be even more difficult to get above. If we did get above the 1.06 level, then we are looking at an attempt to get to the 1.08 level, an area that should be quite difficult to get beyond. In fact, at that point I would even consider a potential trend change forming.

The Federal Reserve continues to find plenty of reasons to tighten the monetary policy in America, and that will have a major influence on what happens with the US dollar, and by extension with this currency pair. Because of this, I don’t see the trend changing anytime soon, and I believe that the euro also has its own issues. One of the most obvious issues right now with the euro that ECB has to worry about energy supply and inflation at the same time. That’s quite a tricky situation you find yourself in, so I think that it is unlikely that the euro will rally on a sustainable course.

If we were to break significantly lower, the first target below would be the 1.02 level, followed by parity. I do anticipate that we will see parity sometime this summer, but when that happens I do not know. After all, this pair does tend to be very choppy and sluggish most of the time, so you have to simply be set up in the right direction and wait for the market to make the move. Whether or not we get below parity is a completely open question at this point, something that I suspect is a question that we will be asking ourselves near August or September. On the other hand, if the Federal Reserve changes its overall attitude, that could change the overall trend in this currency pair, as well as many others.

The British pound has fallen quite hard for a while, so do not be surprised to see a day or two of gains, followed by more of an unwind.

The British pound had a rather rough day on Friday, falling all the way down to the 1.20 level before bouncing 100 pips during the New York session. This ended up forming a massive hammer, suggesting that we have a bit of a fight on our hands. It’s not a huge surprise, as a lot of people who may have wanted to short this market took profit heading into the holiday weekend in America.

That being said, I do think that the 1.24 level is going to be difficult to break above. While the British pound is not necessarily the worst currency right now, the reality is that the Federal Reserve is much more aggressive than other central banks around the world. With that in mind, I think this is a market that will continue to be noisy, but eventually you should see a nice selling opportunity on higher moves. At the first sign of exhaustion, I would not hesitate to short this market, but I also recognize that you don’t want to get too aggressive with your position size.

Breaking down below the 1.20 level does suggest that we would see much more momentum to the downside, perhaps opening up a move down to the 1.18 level. After that, the British pound more likely than not starts to trade near the $1.15 level. This does make a certain amount of sense, especially if we go into a massive recession worldwide, because the US dollar will be the currency everybody wants to own. Beyond that, traders will start to look at the bond market and is a place to be, as they have to worry about liquidity.

It certainly looks as if the British pound will fare better against most currencies when it comes to relation to the US dollar, but that does not necessarily mean that it’s going to go higher. It just simply means that it will be “less bad.” Because of this, I’m looking for opportunities to sell this pair at the first sign of significant exhaustion, but truthfully I would feel much better about shorting a commodity currency against the greenback, such as the Australian dollar or New Zealand dollar. The British pound has fallen quite hard for a while, so do not be surprised to see a day or two of gains, followed by more of an unwind.

Gold markets have been all over the place during trading on Thursday, initially breaking through a major uptrend line, only to turn around and show signs of life again. At the same time, the 50 Day EMA is now crossing below the 200 Day EMA, forming what is known as a “death cross.” This is a very bearish technical signal, but is typically very late. The next move is going to be crucial for this market because we continue to probe the $1800 support level.

If we were to break down below the $1800 level, that could signify rather significant selling pressure entering the market, and perhaps a complete turnaround in the attitude of gold overall. I do believe the gold will eventually turn things around, but that does not necessarily mean that it is going to be easy. After all, the bond market continues to sell off, making interest rates in America rise. It’s much more attractive to hold sheets of paper than it is to pay for the storage of gold, which is what the money would have to do.

On the upside, the $1825 level looks to be resistance, so if we were to break above there, then it’s likely that we could go to the $1850 level, an area that I think is much more important. After that, it opens up the possibility of going to $1880, which is the top of the overall consolidation area.

If we were to break through all that, then the trend in gold would be bullish, and probably send the market looking to the $2000 level as a potential destination. We would need to see a major change in the bond markets for that to happen, so I think this short-term rally is just that, short-term. Nonetheless, I do think that if you are a range-bound trader you will continue to find the gold market to your liking, as it offers so much opportunity in both directions. Depending on your timeframe, you may be trading back and forth all day. The bond market will be key though, because it would also drive where the US dollar and interest rates go, thereby deciding whether or not gold is an attractive asset. You should also keep in mind that if you have the ability to trade spot gold, it is doing much better against other currencies.

Before the launch of the most important events of this week, the exchange rate of the GBP/USD currency pair attempted to rebound upwards. Its gains did not exceed the 1.2324 resistance level, as it settled around the 1.2275 level at the time of writing the analysis, before the announcement of inflation figures in Britain and the testimony of US Federal Reserve Governor Jerome Powell. As I mentioned before, the sterling dollar gains always collide with the pessimism of the Bank of England about the path of raising interest rates and the imminent economic recession.

The British Pound seems to be attracting buyers from the market amid the price action which may be driven by the seemingly increased risk of a more aggressive Bank of England (BoE) interest rate. BoE chief economist Howe Bell reportedly told the Institute of Chartered Accountants in England and Wales on Tuesday that the Bank of England was prepared to act “more aggressively” to bring down inflation in the coming months, even if it comes at the expense of the economy.

This echoed the newly approved guidance given by the Bank of England after the June decision to raise the bank rate from 1% to 1.25%, and came tough on the heels of Monday’s speech from MPC member Catherine Mann, who also called for more serious action in the coming months. Commenting on this, “The British pound remains one of our favorite short positions precisely because of the reasoning presented by Mann – the BoE is less responsive to inflationary shock than other central banks,” says Biban Ray, FX analyst at CIBC Capital Markets.

“Prioritizing growth over inflation means you have to deal with a weaker currency as well,” the analyst added.

This week, Catherine Mann argued that with the Fed set to aggressively raise interest rates in the coming months, and perhaps also the European Central Bank (ECB), sterling would be at risk of further depreciation of the dollar and the euro without compensation from the Bank of England. This would add further to the BoE’s inflation challenge and could, if taken to an extreme, force the Bank to take more aggressive and potentially harmful action at a later date.

As per the forecast: Analysts at Goldman Sachs and Deutsche Bank say the Bank of England will accelerate the pace at which it intends to raise interest rates, but NatWest Markets is not convinced and expects one additional 25 basis points increase in 2022. The difference of opinion reflects the growing uncertainty among analysts. Since the Bank of England raised interest rates again last week, it has, crucially, deviated from previous guidance.

GBP/USD Forecast for Today:

I still expect that any gains in the GBP/USD pair will be subject to selling as the future of interest rate hikes by global central banks remains in favor of a stronger US dollar. Coupled with that, British political anxiety will be an additional pressure factor on the Pound. The closest retracement gains for the currency pair are the 1.2400 and 1.2565 resistance levels, respectively. On the other hand, the strength of expectations for a collapse will return to the vicinity of the psychological support level 1.2000 if the sterling dollar pair returns to the vicinity of the support 1.2175. British inflation figures, Jerome Powell’s testimony, and the performance of global financial markets are the main factors affecting the sterling dollar pair today.