I think it is far too early to think that Bitcoin is going to turn around, and central banks around the world continue to tighten monetary policy.

The BTC/USD has bounced ever so slightly during the trading session on Monday to continue to test the $20,000 region. This is an area that obviously has a lot of psychology attached to it, but the reality is that the market will more likely than not continue to mess around in this area until we get some type of resolution.

If we break down below the last couple of days, then it’s possible that we could break down rather significantly. The market breaking down below that area opens to the possibility of a drop-down to the $15,000 level, and then eventually the $12,000 level. The $12,000 level is where the entire rally kicked off from, so would be a 100% retracement. You see that a lot in crypto it seems, so at this point, I still believe that is a very real threat, especially if risk appetite continues to be so poor.

At this point, we are testing the $20,000 level to see if it will hold as support. We have bounced all the way to roughly $24,000, before pulling back to this area. The 50-Day EMA sits below the $24,000 level and is dropping, so I think that will offer a little bit of dynamic resistance.

Monetary Policy Likely to Hinder Bitcoin

• I think it is far too early to think that Bitcoin is going to turn around, and central banks around the world continue to tighten monetary policy.
• It’s a bit ironic because I’m old enough to remember when Bitcoin was supposed to be completely independent of central banks, but that illusion has been shattered.
• If the US dollar strengthens and interest rates rise, that is horrible for Bitcoin.

In a word, Bitcoin is nothing special, it’s simply another commodity as far as traders are concerned. In fact, it has a very similar profile to other commodities, so you must trade it as such.

I think we do break down, especially as the US dollar has been like a wrecking ball. The US dollar is a little overextended so a little bit of a relief rally would not be completely out of the question. However, at the first signs of exhaustion, I suspect that I will be on my CFD platform looking to short this market. I would not get bullish until we broke over the $25,000 level at the very minimum.

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Price has room to fall to the 0.6800 area.

My previous signal last Monday produced a profitable long trade from the bullish rejection of the support level at 0.6882, but it barely gave the minimum 20 pips of profit so would have broken even in practise.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be entered prior to 5pm Tokyo time Tuesday.

Short Trade Idea

Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.6884 or 0.6953.

• 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.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.6797 or 0.6784.
• 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.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

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 22^nd August that although the AUD/USD currency pair was rising, the price would probably turn bearish again later, not being able to get established above 0.6964.

This was a relatively good call as the dominant price movement for the day was downwards and the price never even reached 0.6964.

The Aussie stood out last week as the only major currency which ended the week slightly higher than the strong US Dollar. However, this currency pair fell sharply in favour of the Dollar just like every other pair did Friday after Powell’s hawkish speech at Jackson Hole strongly boosted the greenback, which has continued to advance since this week’s open. Interestingly, the Aussie has falled during Monday’s Asian session just as strongly as most other currencies, which suggests that any residual strength in the Aussie is being wiped out.

We have bearish momentum and this may slow down or even reverse, however the odds have to be that nothing will change sentiment and we will see further gains by the US Dollar later. The price here has room to fall, with no obvious key support levels until the round number at 0.6800.

I see a short trade from a bearish reversal following a bullish retracement to at least 0.6875 as potentially the most attractive trade setup we might see here today.

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

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I have no interest in shorting this market, at least not until something fundamentally changes.

The USD/JPY rallied a bit during the trading session on Friday, especially after the Jerome Powell speech. The US dollar has been rallying quite significantly against the Japanese yen, and it looks like we are ready to continue doing more of the same. I think it is probably only a matter of time before we reach the highest, and then perhaps go up to the ¥140 level. The ¥140 level course is a large, round, psychologically significant figure that a lot of people will pay attention to.

Pulling back at this point in time only invites more buying, because the trend is still highly substantiated, and has been a major factor for so long. The 50-Day EMA sits below, near the ¥134.50 level. The market will continue to see that as a potential support level, and therefore I would be very interested in any drop toward that level. Even if we break down below there, I think there is plenty of support down to the ¥132 level. The ¥132 level has been important multiple times, and therefore it would not be surprising at all to see it serve as a floor.

Japanese Yen Likely to Continue Losing Value

• The Bank of Japan has repeatedly fought against rising interest rates, in an environment that demands them from multiple countries, and therefore it’s all about trying to work against the will of the market.
• This means that you would have to buy bonds in order to drive those yields down, which means you need to essentially print unlimited currency.
• By doing so, the market sees the Japanese yen lose value, as it is being flooded into the market.

On the other hand, we have the Federal Reserve looking to tighten monetary policy, which of course means that we are looking at a strengthening US dollar in general. We have been in an uptrend for quite some time, and it’s worth noting that the market has recently formed a “W pattern”, and that of course is a very good sign. In fact, we are still somewhat breaking out of the pattern, so a measured move could suggest that we could go as high as ¥140 relatively soon. Either way, I have no interest in shorting this market, at least not until something fundamentally changes. The Federal Reserve has reiterated that this trend should continue.

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At this point, I either fade rallies or celebrate down, because I believe that the British pound is going to find its way down to the $1.15 level. 

The GBP/USD has rallied slightly during the trading session on Thursday, as we are hanging around the 1.18 level. It’s worth noting that level has been a bit of a magnet for price for most of the week, but it’s also worth noting that the level is below the previous low, meaning that we are still very much in a market that is overall negative. I think at this point any time we rally, there will be plenty of people willing to jump into this market and start shorting again.

The 1.20 level above should be resistance, and I would also point out that the 50-Day EMA is racing toward that area as well. In other words, on rallies, I think there will be plenty of technical reasons for traders to get short again. On the fundamental side, the Federal Reserve will have to tighten monetary policy going forward, so the market has already started to price that in. The question is how much longer will they have to go? At this point, a lot of people will be waiting to see what Jerome Powell has to say on Friday about monetary policy and whether the Federal Reserve is getting close to pivoting.

Traders Ready to Pick Up Cheap Dollars

• I think a pivot is a bit of a pipe dream by those who were bullish on risk assets, but that does not mean that the market will not read the statement as such.
• Jerome Powell causes a long history of dropping the ball in situations, so anything is possible. Therefore, I hope this market bounces because quite frankly I’ll be able to short it at higher levels.
• Picking up “cheap US dollars” has been the trade all year, and I don’t see how those changes anytime soon. This is especially true considering that the Bank of England is already stated that the United Kingdom is going into a recession. Meanwhile, here in the United States, we just simply changed the definition of the word “recession.” It’s as if the British don’t understand this can be done!

Anyway, I digress. At this point, I either fade rallies or celebrate down, because I believe that the British pound is going to find its way down to the $1.15 level. That’s not going to be quick or easy, but I think we continue to grind the way we have been over the last several months.

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All things being equal, this is a market that I think remains bullish due to the idea of the Bank of Japan continuing to do whatever it takes to keep interest rates down.

The USD/JPY has pulled back just a bit during the trading session on Thursday as we continue to wait for Jerome Powell to bloviate at Jackson Hole, Wyoming on Friday morning. He will give a statement/speech that will hopefully give people a bit more clarity as to what the Federal Reserve is going to do. If history is any indication, he will say one thing, while the market will interpret the exact opposite. This man is horrible at his job.

We are sitting at an extreme high and aren’t too awfully far from breaking out to a fresh, new high. The ¥140 level would be an area of the target, as well as an area of resistance. The range over the last several days has been rather tight, so therefore it’s obvious that we are waiting on something. If we do pull back from here, it’s likely that the market could go down to the 50-Day EMA, looking for some type of support. On the other hand, if the market rallies from here, then it’s likely that we will challenge that previously mentioned ¥140 level.

The Dollar is Expected to Strengthen

All things being equal, this is a market that I think remains bullish due to the idea of the Bank of Japan continuing to do whatever it takes to keep interest rates down. The 10-year note in Japan is being artificially suppressed at the 0.25% level. The Bank of Japan has pledged to buy “unlimited bonds”, so therefore it’s likely that we will continue to see the Japanese yen suppressed. On the other side of the trade, we have the Federal Reserve looking to tighten monetary policy, so therefore it should continue to push this market to the upside.

A lot of back and forth will be the norm, but we are still very much in an uptrend. In fact, if we stay above the ¥132 level, I don’t see anything to be concerned about. If we were to break down below that level, then it’s likely that we could drop down to the ¥128 level. The ¥128 level is the area where the 200-Day EMA is rapidly approaching, so it should offer a significant support level on any pullback. It’s not until we break the role that that I would be parish of this pair.

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If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100.

The NASDAQ 100 did not do too much during the trading session on Thursday, gaining 1%. It was a relatively positive day, but it’s also worth noting that the Chairman of the Federal Reserve speaks Friday morning at the Jackson Hole Symposium, and traders around the world are trying to figure out whether the Federal Reserve is looking to ease its monetary policy.

Inflation data does not suggest that they should be doing that, but the Federal Reserve has created this monster. After all, they have had a long history of making sure Wall Street gets paid, via cheap money. Now that Federal Reserve governors are not allowed to actively trade in the markets, they may not be as inclined. They have created a generation of traders that have no idea what it’s like to trade in an inflationary environment, or trade without the Federal Reserve looking to bail everybody out at the first sign of trouble. In other words, the markets have been so distorted for the last 14 years that it’s difficult to see how we get out of that machine.

Traders Waiting for Jackson Hole Symposium

• Nonetheless, after he speaks during the session on Friday, if we break down below the 50-Day EMA, then it’s possible that the NASDAQ 100 drops to the 13,000 level, possibly even the 12,000 level.
• On the upside, the 13,500 level is an area that has offered resistance previously, so it’s possible that we could see that as a short-term ceiling. If we were to break above there, then that could change things, turning the market into more of a “buy-and-hold” type of situation.
• If that happens, the market is likely to go looking to the 15,000 level. That would also see certain stocks such as Tesla, Amazon, Microsoft, and the like going higher.

If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100, and it’s also probably worth noting that we have recently pulled back from roughly the 50% Fibonacci level. This is a market that I think continues to see a lot of volatility, and I’m almost positive Jerome Powell do something to mess this entire situation up one way or the other. Because of this, be cautious about your position size, and recognize that you will need to be very flexible.

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I do think that a big move is coming, but I would not be surprised at all to see a lot of noisy shakeouts over the next couple of days, so you need to be very cautious.

The S&P 500 E-mini contract has done very little during the training session, as we sit just below the 200 Day EMA. The 200-Day EMA is an indicator that a lot of people pay close attention to, and therefore it does make a certain amount of sense that we are hanging around in this area. It is also worth noting that we are between the 50-Day EMA underneath, and the 200-Day EMA, suggesting that we are getting ready to squeeze.

The size of the candlestick leaves a little bit to be desired, so at this point in time, I think we are simply waiting to see some type of decision from Jerome Powell and how the market reacts to any statement that he makes. I think the market will try to find some type of reason to make his statement dovish, and clearly, Jerome Powell is not good enough for communicating to make that not happen. It’s very common for the market to read what once into a statement, take a little bit of time, and then come back into the fold again.

Noise Ahead

• I think it’s very likely that we continue to see a lot of noisy behavior, and therefore I think the volatility is probably only going to get worse.
• Clearly, Jerome Powell has made a career of doublespeak, but now that the reserve governors are not out there day trading, they may not have the same drive to support Wall Street.
• I do think that a big move is coming, but I would not be surprised at all to see a lot of noisy shakeouts over the next couple of days, so you need to be very cautious.

If we break down below the 50 Day EMA, then it’s likely that we go down to the 4000 level, which of course is a large, round, psychologically significant figure. On the other hand, if we turn around and go to the upside, it’s obvious that the 4300 level is an area where we have seen a lot of selling pressure, so I would anticipate that the area could be rather resistant to upward pressure. This is a market that I think continues to see a lot of noisy behavior, and therefore position sizing will be paramount.

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It’s about speculation, and not holding for the future like some people will tell you. 

The BTC/USD continues to go sideways as the market seems content to hang around the $21,500 level. There’s no real volume, nor is there any interest in owning Bitcoin now. It’s times like this where accumulation starts to happen and therefore big profits can be made, assuming that you can wait to get paid.

This is not to say that we are at the bottom, but I do know that a lot of longer-term addresses are starting to accumulate again, suggesting that we might be near an accumulation phase. If we break down below the recent lows from a couple of months ago, then it’s likely that we drop down to the $12,000 level. That’s very possible given the financial situation around the world. After all, Bitcoin has not decoupled from the S&P 500, and more specifically the NASDAQ. The NASDAQ is all over the place due to concerns about the Federal Reserve tightening monetary policy, and therefore so is Bitcoin.

What Really Matters in This Market

• Keep in mind that institutional money is what pushes Bitcoin around these days, so it’s going to act more like a commodity than anything else.
• Whether or not it has any real-world use is completely irrelevant to most people who trade it, nor does it matter to them who controls everything.
• What matters to them is whether they can make money trading it. That’s the very essence of crypto that we have seen so far, people trying to make money.

While this is not necessarily an indictment of crypto itself, it does give you an idea of the mentality behind this market. It’s about speculation, and not holding for the future like some people will tell you. Yes, there are maximalists out there, but they are such a small portion of the market that they hardly move the needle. At this point, every time we dip a few thousand dollars, they will be longer-term buyers and investors willing to get involved, because they are waiting for the next great bull market. I believe it’s too early to see that, but as soon as the Federal Reserve pivots, that’s where we start to see Bitcoin and other risky assets such as crypto in general start to take off. That will be your cue that the next bullish run has started.

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• The NASDAQ 100 has done very little during the trading session on Wednesday as we continue to sit just above the 50 Day EMA.
• This is a market that is going to be waiting on Jerome Powell and his speech on Friday.
• The Jackson Hole Symposium features several central bankers and speeches that will give us an idea of where their thoughts are.

If we were to break down below the 50 Day EMA, then it’s possible that we could unwind down to the 12,500 level. Underneath, then the market could open up a move down to the $12,000 level. On the other hand, if we turn around a break to the upside, then the 200 Day EMA is sitting at the 13,500 level. This is a market that had recently broken out, and now it is looking for an opportunity to find some type of support underneath to turn things to the upside. We are also between the 50-Day EMA and the 200-Day EMA, which typically signifies that we are about to see a squeeze.

Traders Worried About the FED

The market breaking down will more likely than not have a lot to do with the speech coming out of Jerome Powell on Friday, which if interpreted as extraordinarily hawkish, while traders worried about plenty of downward pressure on the economy. Furthermore, interest rates could continue to be a major driver of war we go next, so if interest rates rise after that statement, it will make people more interested in that asset as opposed to stocks. High-growth technology companies tend to follow the cheap money, so it needs to see cheap money and low interest rates in order to take off.

I think the only thing that you can count on Thursday is a lot of lackluster trading, and unless something is leaked, I anticipate that everybody is going to be waiting around for that Jerome Powell speech at 10 AM on Friday. Market participants are waiting to see whether or not the Federal Reserve is looking to pivot, which is a story that Wall Street has told itself. At this point, people are completely ignoring what the Federal Reserve says, so it’s not necessarily going to determine that we are breaking down the market. After all, Wall Street will find some type of narrative to help. However, if Jerome Powell is aggressive in his speech, we may actually see a selloff on Friday. Thursday is about waiting.

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The EUR/USD has been very noisy during the trading session on Wednesday as we continue to hover just below the parity level. This is a particularly interesting pair because it is going to be highly driven by speculation on what the Federal Reserve is about to do. With the Jackson Hole Symposium going on at the moment, there is a lot of waiting around on Jerome Powell.

If the speech at 10 AM Eastern Standard Time on Friday is extraordinarily hawkish, that will probably send the Euro much lower, as the US dollar will strengthen. Even if we do rally after that speech, I suspect it is probably only a matter of time before we see sellers jump back into the market and punish the Euro. After all, the interest rate differential between the 2 is rather wide and is almost big enough to drive a truck through. Beyond that, there is a whole host of other issues in the European Union that you would have to be cognizant of.

Winter is Coming

• The most obvious issue is going to be the energy situation in the European Union, due to the fact that the Russians are holding natural gas hostage.
• At this point, it looks like it’s going to be a very brutal winter for the European Union, so it’s not a huge surprise to see the traders jumping all over the currency.
• Every time this market rallies, it’s likely that we will see plenty of sellers. The 50-Day EMA is just above the 1.02 level and is dropping quite significantly.

Even if we were to break above that level, then we have the 1.04 level to offer resistance, and then it’s possible that we could see the 1.05 level offer resistance as well. In fact, it’s not until we break the role that I would even consider buying the Euro, but really at this point in time I think that any rally at this point in time is going to be begging to see sellers come in and take advantage of “cheap US dollars.” On the downside, I anticipate that the market is going to go down to the 0.98 level, which is an area that historically has been important. Ultimately, this is a market that I think continues to see a lot of noise, and at this point, I hope it bounces so that I can start shorting.

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