The market is more likely than not going to have more of a “fade the rally” type of situation

The West Texas Intermediate Crude Oil market has gone back and forth during the trading session on Friday, as we continue to see a lot of confusion in financial markets overall. After all, oil is the lifeblood of the markets, so therefore it does make quite a bit of sense that we would see a neutral candlestick as there are so many questions.

• The $87 level underneath has been short-term support, while the $94 level above has been resistance.
• The 50 Day EMA is starting to drop at this point, and perhaps reach the 200 Day EMA.
• We are getting relatively close to a “death cross”, which is a very negative situation, and could send algorithmic traders to the downside.

The market has been drifting lower for a while, and now that we are hanging around this consolidation area, it is worth noting that you could make out a little bit of a falling wedge here, so we might get a bounce. Any rally at this point in time is probably short-lived though, perhaps allowing just a bit of a move toward the $100 level. 

Crude oil forecast for today

One thing that you need to keep in mind is that there is a lot of concern when it comes to global demand, as we are starting to see economies slow down. Furthermore, we also have to keep in mind that the US dollar has been strengthening, and that means it’ll take less of those dollars to buy oil, all things being equal. The market is more likely than not going to have more of a “fade the rally” type of situation, or perhaps just a breakdown below the recent support that allows oil to drop down to the $80 level over the next several weeks.

It’s not until we break above the $100 level on a daily chart that I would consider going long in this market, but I think it would take a significant amount of upward momentum and strength to get there. I just don’t see how that plays out, but you always have to have the other hypothesis in the back of your head, even if it goes against almost everything that you know or see. That being said, until we break above there, I’m looking at rallies as an opportunity to get short again.

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If we break above the highest of the trading session on Tuesday, then we continue toward the 4500 level.

• The S&P 500 index did very little during the Friday session other than frustrate traders.
• The market look like it was going to fall out of bed, only to turn around and settle on a slightly positive day.
• The hammer does suggest that there is still quite a bit of buying pressure here, but quite frankly can be interesting to see how Friday plays out as there are a lot of options coming due.

Noisy Behavior Ahead

The market will continue to see a lot of noisy behavior more than anything else, so you will need to be cautious about your position sizing. Quite frankly, I did have a major problem getting a handle on the overall market during the day, as it was one of those days that you are generally better off sitting out. That being said, I do think that a market is more likely a place where you have to let it prove itself. We have had a massive rally, and it’s difficult to get overly excited about a market that has shot straight up in the air. A lot of people out there believe that the Federal Reserve is going to step away from quantitative tightening, while the Federal Reserve swears up and down it’s going to do it. In this scenario, somebody is going to lose, and my suspicion is this going to be the American public.

Having said that, it looks to me like the markets have nowhere to be in the short term, and therefore you have to look at it through the prism of a grind until we get to next week. As soon as we get the next week and get central bankers bloviating about what they are going to do to fight inflation, that’s when momentum picks back up again. There have been a lot of people out there reading dovishness coming out of the Federal Reserve, while there have been several counterbalancing that suggest that they “misunderstood the Fed.” This has been the game that the Federal Reserve’s been playing for 14 years, and now that they are no longer day trading the stock markets, it’ll be interesting to see whether or not they feel the need to save Wall Street as their interests don’t necessarily line up anymore. If we break down below the bottom of the candlestick for Friday, we will probably go looking to the 200 day EMA for support. If we break above the highest of the trading session on Tuesday, then we continue toward the 4500 level.

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If we were to break down below the bottom of the candlestick for the day, that could be a very negative sign, perhaps sending this market much lower.

The AUD/USD pair has fallen rather hard during the early hours on Wednesday, as the Royal Bank of New Zealand decided to raise interest rates by another 50 basis points. This move was in sympathy for the Kiwi dollar, slamming the Aussie down into the 50-Day EMA.

Later in the day, we had the FOMC Meeting Minutes, which traders interpreted as showing signs of potential dovishness. Because of this, we did get a little bit of a lift, but it is probably worth noting that we are still very much in a consolidation area that will probably cause major problems. With that in mind, I think this is a market that remains choppy, and therefore probably one that you need to focus on short-term charts. That 0.70 level above is the beginning of relatively significant resistance, which could extend all the way to the 200 Day EMA, which is currently at the 0.7150 level. Keep in mind that the Australian dollar is highly levered to the Chinese economy.

Will AUD Return to a Bullish Trend?

• If we were to break down below the bottom of the candlestick for the day, that could be a very negative sign, perhaps sending this market much lower.
• It is likely that we would see the Aussie drop back down to the 0.67 level, an area that has been important previously.
• Not only did we bounce from there recently, but it’s also longer-term support and resistance area, and therefore it does make a certain amount of sense that we would struggle in that region.

If we do break down below the 0.67 level, it opens up a move down to the 0.65 level, and then possibly even lower than that. It should be noted that this level has been important going back several years, so it should not be a surprise that we had bounced from there. Furthermore, if we were to break down below that level, it would be a severe breach of support, so it could open a big flush lower. On the upside, if we were to take out the 200 Day EMA going forward, that would obviously be bullish, and would technically make the Australian dollar back in a bullish trend again. I don’t see that happening, but it’s something that you need to be aware of.

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Expect a lot of volatility going forward as we have seen getting here.

• The NASDAQ 100 Index was very volatile on Tuesday as we had no real certainty by the end of the day.
• The market has been all over the place, so it does make a certain amount of sense that there are a lot of anxieties at the moment.
• The market has previously been on fire, so it’s interesting to suggest that we are at a major inflection point.

Important Candlestick Wednesday

The market has recently broken above a major resistance barrier in the form of the 13,500 level, so it certainly makes quite a bit of sense that it is offering a short-term support level. That’s exactly what we saw during the trading session on Tuesday, as we plunged lower only to see buyers step in and pick the market back up. By the end of the day, we were essentially unchanged, so it’s difficult to read much from this candlestick. It is because of this that I believe the Wednesday candlestick is probably going to be one of the most important ones over the last couple of months.

If we break above the top of the candlestick, then it’s possible that we could go looking to the 200-day EMA, which is currently right around the 14,065 level. After that, we have a significant amount of resistance at the 14,250 level, and that probably makes a significant target for those willing to get bullish at this point. On the other hand, if we break down below the bottom of the candlestick for the day, we could go lower to look toward the 13,000 level, an area where I expect to see a lot of support at based on “market memory”, as there was a lot of resistance in that general vicinity.

Keep in mind that the NASDAQ 100 is led by just a handful of companies, so you could probably call it the “NASDAQ 7″ or so. Pay attention to all the usual actors such as Tesla, Microsoft, Alphabet, and the like. If they are rising, this index will rise right along with them. On the other hand, if they have a rough go, then we will see this market pullback to that 13,000 level. Either way, expect a lot of volatility going forward as we have seen getting here.

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The USD/CAD has packed plenty of price action in the past few days of trading and volatility is likely to continue as ‘fair’ equilibrium is sought.

As of this writing the USD/CAD currency pair is near the 1.285750 mark.  On the 4^th of August the USD/CAD was trading near lows of 1.28200, coming within sight of support seen in the last week of July and but not coming anywhere near the low on the 1^st of August which touched 1.27675. On the 5^th of August the USD/CAD soared to nearly 1.29880, but then reversed lower before going into the weekend.

Monday’s move towards Lows may Raise Eyebrows of USD/CAD Speculators

Intriguingly yesterday’s trading in the USD/CAD also produced another selloff and the currency pair actually consolidated between 1.28480 and 1.28650 for a lot of the day. This morning’s trading has seen the USD/CAD essentially sustain these lower marks, which were last traded in a sincere way on the 4^th of August. The spike upwards on Friday via buying in the USD/CAD happened after the Average Hourly Earnings data showed an uptick in payroll spending, per my interpretation of Forex.

• Volatility continues to be a minefield in the USD/CAD for day traders, and risk management certainly is needed.
• The USD/CAD is testing lows seen on the 4^th of August, which may entice speculators who believe the currency pair is momentarily oversold.

The notion that the USD/CAD spiked higher on strong buying Friday, and then reversed lower may be seen as a pure technical move proving the Forex pair was overbought. However, some speculators may look at the current value of the USD/CAD as it traverses important support and suspect the currency pair may actually now be oversold. Choppy conditions are likely to be demonstrated in the coming days.  

If the USD/CAD starts to trade within a Narrow Range this may Prove Attractive

Traders who are cautious may want to see if current support levels can hold. If the USD/CAD can stay within the 1.28570 to 1.28600 zone for a time, this may prove to be a rather interesting ignition point to launch trades. However, day traders should probably look for quick hitting trades that are not overly ambitious.  The use of conservative leverage and a slightly wider stop loss, compared to a relatively close take profit target may prove to be worthwhile.

Consolidation may prove to be favorable in the near term as financial houses interpret the tea leafs from the U.S Federal Reserve. Traders looking to take advantage of support levels may want to place buying positions near support around the 1.28565 to 1.28550 vicinity to look for upside momentum.

Canadian Dollar Short-Term Outlook

Current Resistance: 1.28650

Current Support: 1.28555

High Target: 1.28970

Low Target: 1.28212

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The best opportunities are likely to be fading key levels.

My previous signal on 15^th June was not triggered, as the bearish price action took place above both the nearby key resistance levels which I had identified.

Today’s AUD/USD Signals

Risk 0.75%

Trades may only be taken prior to 5pm Tokyo time Tuesday.

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.6999 or 0.7038.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.6848 or 0.6774.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote in my previous forecast on 15^th June that it would not be surprising if we got at least a bit of an upwards movement if the price could get established above 0.6918. I was looking for a short trade following a pull-back if the FOMC announced a 0.75% rate hike.

This was a good call, as the major movement was upwards and it did take off after 0.6918 was breached, giving much more profit than I had expected. However, the FOMC did then later announce a 0.75% rate hike which brought the price back down, as I had expected.

The technical picture has stagnated – we now have a fairly wide and choppy consolidation pattern playing out between the very big round number at 0.7000 which is acting as resistance, and the nearest support level at 0.6840. This is a lot of room for the price to move with any safe entry points, and as it is a quiet Monday, it is highly likely that neither of these levels will be reached today.

I think the best opportunity which could set up today would be a bearish reversal at 0.7000. I would be happy to take a short trade if that happens.

In the unlikely event that the price can get established above 0.7000 later, that would be a bullish sign and signify that the US Dollar is ready for a bigger selloff. Risk sentiment is improving, and if it continues to do so, we could see it expressed strongly in this currency pair which tends to rise and fall along with global risk sentiment.

There is nothing of high importance today concerning either the AUD or the USD.

The euro is holding up relatively well against the stronger dollar.

My previous EUR/USD signal yesterday was not triggered as there was no bearish price action when the price first reached the resistance level which I had identified at $1.0545.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 5pm London time today.

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.0540.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 50 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.0457 or $1.0391.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

EUR/USD Analysis

I wrote yesterday that the best approach to this currency pair would probably be to look for a reversal at either of the nearest support or resistance levels on short time frames as I expected the action to be dull.

This was not a good call as the price rose strongly early in the day before falling back.

The price has returned to approximately where it was this time yesterday, again trading between nearby support and resistance levels. This makes it very difficult to take a directional bias.

The best I can say is that the support level at $1.0457 looks strong and likely to hold well, so if the price does fall – and today the US Dollar does seem to be stronger, so it may happen – I think a bullish bounce there on a short time frame could provide a good scalping opportunity.

We may see more movement in the Euro when British CPI (inflation) data is released later.

There is nothing of high importance due today regarding either the EUR or the USD.

In general, I have no interest in trying to get long.

The Parisian CAC Index gapped higher Monday but then pulled back to find buyers underneath. By doing so, it suggests that the market is going to try to rally again, but there are plenty of reasons to believe that there is resistance above. After all, the CAC is sensitive to risk appetite, so you need to be cautious about what you do if you are trying to buy into this market. After all, the CAC is heavily influenced by luxury goods, something that does not go well in times of recession or global slowdown.

The candlestick for the trading session is somewhat bullish but still needs to pay attention to the massive resistance that I see based on the potential down-trending channel. There is a little bit of a downtrend based upon the 50-day EMA as well, so you should pay attention to that. It is at the €6434 level and dropping quite drastically. We had recently formed a “death cross” when the 50-day EMA drops below the 200-day EMA, and then a reluctance to try to break above the 50-day EMA. The entire area between the 50-day EMA and the 200-day EMA should be a massive resistance barrier that the market is going to struggle to break above.

If we were to turn around and break down below the €6200 level, it is likely that the market will drop to the €6100 level rather quickly. This is a market that I think will continue to see a lot of sellers, as people will be running away from risk appetite, and if Germany drops, so will Paris. During the trading session, Christine Lagarde suggested that perhaps the ECB would start to raise rates at a ¼ percentage clip, which could work against risk demand as well. Either way, we are in a decisively negative market, and I just do not see that changing anytime soon. I would be a seller of rallies but would also sell breakdowns below support. Further exacerbating trouble will be the energy problems in the European Union, as well as a war on the doorstep of the continent. In general, I have no interest in trying to get long.

You need to be very patient with any trade that you take in this market, as it will not necessarily move as quickly as many of the other emerging market currency pairs out there.

The US dollar fell a bit on Tuesday to break down below the 20 pesos level. That being said, there are multiple Federal Reserve members speaking during the day on Tuesday, so a lot of noise would have been anticipated. When you look at the chart, you can see that the 19.75 pesos level has been significant support previously, so it does make sense that we would see it offer support again. In fact, we formed a bit of a “double bottom” and have bounced from there.

On the upside, the 20.25 level should offer a bit of resistance as the 50-day EMA sits there, and it is also an area where we have seen both support and resistance multiple times. However, we have sliced through there a couple of different times, so if we break above there it would not be the be-all and end-all of the trend. If we break above there, the 20.50 pesos level and the 200-day EMA comes into the picture just below there. Ultimately, I do think that we will continue to bang around in this market, but it is also probably going to be highly influenced by the crude oil market, which of course has shown quite a bit of strength as of late.

If we were to break down below the 19.75 level, then it would more likely than not have to do with yields in America dropping, or oil taking off to the upside, take your pick. This is not to say that it would be easy to happen, just that it could. If we break above the 20.50 pesos level, that would be an extraordinarily bullish sign for the greenback, and you would probably see the dollar strengthening against most other currencies. At this point, it appears that the higher interest rates in Mexico continue to attract inflows, right along with the oil market driving up demand for the currency. Keep your position size reasonable, but also recognize that this pair does tend to move very slowly, so you need to be very patient with any trade that you take in this market, as it will not necessarily move as quickly as many of the other emerging market currency pairs out there.

BNB/USD has demonstrated a serious amount of choppiness the past five days and its volatile results are not likely to end soon, creating speculative opportunities.

Day traders who enjoy a speculative wager with quick hitting results may be tempted to look at BNB/USD.  The results in Binance Coin the past week of trading have been choppy, and while they have mirrored many of the major cryptocurrencies, BNB/USD also famously marches to its own drumbeat. As of this writing BNB/USD is below the 392.0000 ratio and conditions are fast.

In late trading last night BNB/USD slipped to nearly 380.0000 and then reversed higher.  Because of its relatively large value per coin, BNB/USD may not produce the rapid fire percentage changes some speculators crave. Yet with a limited amount of leverage and the fact that solid volumes often create swift changes in value, Binance Coin remains a favorite of traders while searching for rapid outcomes.

Moves of a couple of USD within a few minutes are common in BNB/USD, and traders are urged to use entry price orders when wagering to make sure their fills meet expectations. Day traders looking for quick results can use take profit and stop loss orders, and produce results within a limited amount of time that some may find quite attractive. While behavioral sentiment in the cryptocurrency market remains nervous, choppy displays of value have become commonplace the past few days.

BNB/USD is within sight of one month lows, and those depths were actually created late last night.  While the reversal upwards in the past handful of hours may be tempting for speculative bulls to dream of higher prices, the move upwards may also tempt traders to believe another leg down may be exhibited rather soon too via another reversal.

The 390.0000 support level should be watched carefully, if this juncture fails to hold back selling pressure another swift burst of downward pressure may mount. Binance Coin is a major cryptocurrency which certainly can be a barometer of market sentiment due to its use as a utilitarian digital asset to trade other cryptocurrencies. Support levels are still be within sight of technical traders. If mid-March values in BNB/USD near the 380.0000 were to suddenly become vulnerable this would certainly add to nervousness.

Choppy technical conditions in the short term will certainly lead some traders to chase nearby support and resistance levels. However traders should be cautious about violent moves downwards. From a risk reward perspective there appears to be a greater chance for a larger amount of selling to be produced near term, compared to a sudden thrust upwards which penetrates distant resistance levels.

Binance Coin Short-Term Outlook

Current Resistance: 392.0700

Current Support: 388.6500

High Target: 401.1000

Low Target: 381.2900