Fading rallies continue to be my favorite way to trade this market because I do know that typically after a choppy move like we have seen followed by a big drop, we chop around a little bit more and then go lower again.

• The EUR/USD initially rallied on Thursday provide struggled to stay above the parity level.
• At the end of the day, we ended up forming a bit of an inverted hammer, which suggests that perhaps we are going to continue to see downward pressure.
• However, Friday is a bit of an outlier at this point, due to the fact that Jerome Powell is speaking at the Jackson Hole Symposium, and the whole world is trying to see whether or not the Federal Reserve is going to continue being hawkish going forward.

Looking at this chart, you can see clearly that we are in a downtrend, and there’s nothing out there to make me believe that the Euro will suddenly be a currency that you want to own. Even if we were to turn around and break above the top of the inverted hammer, which is a traditionally bullish sign, I will just step to the side and look for an opportunity to start shorting at higher levels. The 50 Day EMA above is sitting near the 1.02 level and dropping quite drastically. I think that any approach to that area will see a lot of resistance and selling pressure.

Traders Waiting for European Central Bank

If we were to break down below the last couple of candlesticks, then my target is the 0.98 level. The 0.98 level is an area that traditionally has been important, but you must go back over 2 decades to see when it was last tested. I think at this point, everybody knows that the European Union is going to have a very bleak winter, so I think a lot of people are going to have to keep that in mind, especially when they try to judge what the European Central Bank will have to do. They will almost certainly have to be loose with monetary policy, and therefore it is worth noting that the US dollars on the other side of the spectrum, as the Federal Reserve, must fight inflation, and does at least try to pretend like they are going to do so.

Fading rallies continue to be my favorite way to trade this market because I do know that typically after a choppy move like we have seen followed by a big drop, we chop around a little bit more and then go lower again.

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This is a market that I think continues to see plenty of noisy behavior.

The AUD/USD has initially rallied during the trading session to show signs of bullish pressure, breaking above the 0.69 level. However, we have given back quite a bit of the gain, and now we are warming and inverted hammer. If we break down below the bottom of the inverted hammer, that is a very negative turn of events, opening up the possibility of negativity.

In that scenario, it is very likely that the Aussie goes looking to the 0.67 level, which is an area that we had bounced from previously. This is a market that if we break down below that level, then it’s likely that the market falls apart and then goes down to the 0.65 handle. Keep in mind that the Australian dollar is highly levered to the Chinese economy, so therefore you need to pay attention to everything that’s going on in the Chinese mainland. There are a lot of concerns right now and therefore I think that you could see quite a bit of volatility.

Traders do not like volatility

• The 50 Day EMA above offers quite a bit of resistance, and currently sitting at the 0.6970 level.
• This is a market that given enough time should see quite a bit of selling pressure, and I think that Monday was the first shot across the bow.
• If we do rally from here, the 0.70 level should be a significant resistance barrier, and then we have the 200-Day EMA near the 0.7120 level after that.

In other words, this is a market that I think continues to see plenty of noisy behavior, and that typically means lower prices. Volatility is something that traders and investors do not like, typically leading to further selling pressure.

It is not until we break above the 200 Day EMA that I would consider buying this market, which would be a real stretch at this point. If we do break above there, then it’s perhaps time to start thinking about a trend change. We are light years from that happening so it’s more likely than not going to be a situation where we rallies as selling opportunities at the first sign of exhaustion, and you can also take a look at the Monday candlestick and say perhaps that’s exactly what we are seeing over the last 24 hours.

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The best way to handle Bitcoin is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term.

• The BTC/USD currency pair has rallied significantly during the trading session on Thursday to reach the $25,000 level. However, the market has pulled back from there to show signs of exhaustion.
• The daily candlestick is forming a shooting star, which of course is a very ugly look.
• If we break down below the bottom of the candlestick, then it’s likely that the market could drop down to the $23,000 level.

If we do break down below that $23,000 level, then it’s likely that we could go down to the 50 Day EMA underneath. The 50-Day EMA sits right around the $22,000 level. Anything below there opens up the possibility of a huge drop lower, but I don’t think it’s very likely in the short term. Longer-term, it’s very possible, especially if we get some type of spike in interest rates were sell-off when it comes to risk appetites in general. Ultimately, I think this is a market that will more likely than not continue to be very noisy, and I do think that the Bitcoin market is still in the midst of trying to figure out whether or not it can turn around for the long term.

Even if we do break above the $25,000 level, it’s possible that we will just see more selling pressure near the $28 level. The $28,000 level extends all the way to the $32,000 level, meaning that it should be a major resistance barrier. The market breaking through all of that would end up being a major trend change, and I think everybody will jump in at that point. More likely than not, it’s likely that we go much lower, perhaps trying to get down to the $20,000 level.

If you are a longer-term investor, then you need to look at these dips as a potential buying opportunity, but you also have to be able to put up with quite a bit of volatility. In fact, the best way to handle Bitcoin at this point is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term. That being said, the market continues to be very noisy, and therefore you need to be cautious about getting too deep into a position. In fact, it’s very likely that we can see a longer-term sideways market more than anything else, building up the accumulation phase before the next bullish market.

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I think we will continue to see more of a “fade the rally” market if we don’t break down directly.

• The GBP/USD currency pair rallied initially on Tuesday but gave back gains in the same general vicinity where we had seen selling pressure on Monday.
• Furthermore, the 50-Day EMA sits just above these two shooting stars, so it suggests the me that we are going to continue to see plenty of selling pressure overall.

CPI Numbers to Bring Noise

The 1.20 level underneath is significant support, and of course is a large, round, psychologically significant figure. In that area, I would anticipate that we should see a certain amount of support, as well as psychology, come into the picture. The fact that Wednesday is the CPI number coming out of the United States does suggest that we could hear quite a bit of noise, and perhaps a little bit of clarity when it comes to the future direction of the Federal Reserve. Ironically, the Federal Reserve has been telling people for a while that they are going to be extraordinarily aggressive to fight inflation, even though the markets have been arguing this point with the Fed.

Once we get the CPI number that comes out during the day on Wednesday, it’s possible that we either get a number that is hotter than anticipated or one that comes in under. If it’s hotter than anticipated, it’s likely that the US dollar will strengthen due to the perception of a more hawkish Federal Reserve is more likely than not going to be positive for the greenback. Core CPI month over month is anticipated to come out of 0.5%, so anything bigger than that will almost certainly send this pair lower.

What is also worth noting is that the Bank of England has already stated that they are expecting England to go into a recession, so the British pound will probably continue to be a bit soft as a result. Either way, this is a market that has been drifting for a while, and down to the lower left-hand corner of the chart. I think we will continue to see more of a “fade the rally” market if we don’t break down directly. If that were to be the case, it should be thought of as offering value for the US dollar. Either way, I have no real interest in buying the British pound until we break above the 1.26 level.

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I’m either going to fade short-term rallies, or sell a breakdown.

• The EUR/USD currency pair rallied a bit Monday but then turned around to show signs of weakness again.
• We have been in consolidation for a while, with the 1.03 level being resistance and the 1.01 level underneath being supportive.
• This has been the case for a couple of weeks, so it’s not a huge surprise to see that we stayed within this area.

Furthermore, it makes quite a bit of sense that we are still in that area due to the fact that the CPI numbers come out on Wednesday, and people will be paying close attention to how that turns out in order to get an idea as to what the Federal Reserve is going to do next. It’s a bit odd, due to the fact that the traders out there seem to think that the Federal Reserve is going to become a bit looser with its monetary policy going forward, even though the Federal Reserve has explicitly said that they are going to continue to fight inflation as its number one job.

50-Day EMA Dropping

The 50-day EMA sits below the 1.04 level and is dropping lower. That being said, even if we break above the 1.03 level, both the 1.04 level and the 50 Day EMA look likely to cause a significant amount of resistance. The 1.04 level has been previous support, so there is probably going to be quite a bit of “market memory” in that area on the way back up.

On the other hand, if we break down below the 1.01 level, it’s possible that we go down to the parity level. The parity level of course is a major psychological level that people will be paying close attention to.

If we were to break down below the parity level, it’s likely that the euro will drop down to the 0.98 level rather quickly. The fact that the Germans are not going to have enough gas over the next several months, and we are already starting to see shutdowns of major factories being a real threat, means it is probably only a matter of time before the European economy tanks again. In that scenario, it’s likely that we could go much lower, as we should continue to see plenty of downward pressure. I’m either going to fade short-term rallies, or sell a breakdown.

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This is a market that is difficult to trust because there’s no real reason for it to go higher.

• The S&P 500 Index tried to rally during the early hours on Monday, but the E-mini contract has pulled back from the crucial 4200 level.
• This is an area that we need to break above to continue the overall uptrend, and now that we have to worry about the Wednesday CPI number, this is definitely something worth paying attention to.

Keep an Eye on the CPI

By forming a shooting star, it suggests that we have further to go to the downside. Having said that, I would anticipate that there’s a certain amount of support at the 4100 level, but the CPI number, especially the Core CPI number, will have a major influence on what people expect the Federal Reserve to do next. After all, the S&P 500 and stock markets in general have nothing to do with economic reality in the United States, but solely upon monetary flow coming out of the central bank. They gave up the idea of tracking the economy 14 years ago.

If we were to break above the 4200 level, it would almost be a reaction to a number on Wednesday that is likely to be a sign that the Federal Reserve can ease up on monetary policy. I don’t expect that to happen, and I do believe that even if we did, we would see more trouble at 4300. The 4300 level is an area that’s been resistant previously and now has the 200-day EMA sitting right around it as well.

This has been a nice rally, but I think it’s getting a little long in the tooth at this point. Breaking down below the 4100 level would be the first sign that we are going to test the 4000 level. The 4000 level will bring the 50 Day EMA into the focus of traders, which has a certain amount of technical interest built into it. If we break down below there, we will probably test the lows yet again. This is a market that is difficult to trust because there’s no real reason for it to go higher. There’s no real reason to think that the Federal Reserve is going to start stepping away from tightening, and it’s a bit surprising just how much credibility the central bank has lost over the years, as Federal Reserve governors coming out and stating that they are going to continue to get aggressive simply are ignored by the market.

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Keep your position size reasonable, because violent swings will probably be more the norm than anything else.

• The NASDAQ 100 Index initially tried to rally Monday but gave back gains as traders are starting to run into a significant amount of technical resistance.
• Ultimately, this is a market that I think will continue to see a lot of noisy behavior, and you need to be cognizant of the fact that we ended up forming a shooting star, a very bearish sign indeed.

Eyeing the 13,000 Level

At this point, now we start to pay attention to the 13,000 level. If we break it down below there, could open up even more selling going forward, opening up the possibility of an attempt at the 50-day EMA which is currently sitting right around the 12,250 level. Breaking down below that opens up a wave of selling. The question now is whether or not interest rates will have to continue to go higher but there will be a lot of questions between now and Wednesday as we have to wait for the CPI figures. The CPI numbers will continue to be closely watched by the Federal Reserve as inflation is by far the biggest thing they are concerned about.

Alternately, if we were to break above the 13,500 level, that opens up the possibility of a move to the 200-day EMA which is closer to the 14,000 level. I don’t necessarily expect to see that happen, but the stock market is so disconnected from the real economy that it would not be a huge surprise. Ultimately, I would anticipate that we still have plenty of volatility ahead of us, and as long as volatility is relatively elevated, that does tend to bring significant selloffs occasionally. I do think that the biggest push lower has probably already happened, but I also recognize that there are a lot of things that could go wrong in the relatively near term.

We are a little overbought anyway, so a bit of a pullback does make sense. Furthermore, we are right smack dab in the middle of an area that’s been important multiple times, so one would think that a certain amount of market memory should come into play in this region. Keep your position size reasonable, because violent swings will probably be more the norm than anything else.

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The market is likely to be one in which you need to pay close attention to short-term moves, but still favor the downside overall as the US dollar is by far the strongest currency in the world.

• The GBP/USD currency pair initially tried to rally Monday but gave back the gains rather quickly.
• By doing so, it suggests that the market is going to test the 1.20 level underneath, which is a large, round, psychologically significant number that a lot of people will have to pay close attention to. It is also an area that has seen support previously, so if we were to break down through it, that could kick off even more selling pressure.

UK Recession Likely to Cause Noise

If we were to break down below the 1.20 level, the market is likely to go down to the 1.18 level. The 1.18 level has offered a significant amount of support, so breaking down below there opens up the bottom for the British pound. On the other hand, the market could turn around and try to take out the 1.22 handle. If it does, that would be a very bullish sign, perhaps opening up a move to the 1.23 level. All things being equal, this is a market that I think is going to continue to be noisy, due to the fact that the Bank of England has just stated that the United Kingdom is almost certainly going to head into recession. That is not good obviously, and ironically, so is the United States.

That being said, the market is likely to continue to see a lot of demand for US dollars, especially if they start to jump into the bond market in order to protect trade accounts in what is a very rough economic situation. Ultimately, I think that rallies will continue to be sold into, so it’s difficult to get bullish anytime soon. In fact, it’s not until we break above the 1.26 level that I would think we could get beyond in order to change the trend. If we were to change the trend, then the market could go all the way to the 1.30 level.

The only thing that I think you can count on here is going to be a lot of volatility, but that’s nothing new. With that being said, the market is likely to be one in which you need to pay close attention to short-term moves, but still favor the downside overall as the US dollar is by far the strongest currency in the world.

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I’m not particularly rushed to get involved in this market anytime soon as far as a buying opportunity is concerned.

• The BTC/USD currency pair struggled with the $24,000 level yet again on Monday, as it looks like we are running out of a bit of momentum.
• The $24,000 level has been difficult for a while, so it’s not a huge surprise to see that we have failed again.
• At this point, I think the market is trying to figure out whether or not the bear market is over with, or if this has simply been a bit of sideways consolidation.

Murky Outlook

It’s difficult to make that decision quite yet, but when you look at this chart it’s easy to see that there’s a lot of noise in various places. We have been in a downtrend for a while, and Bitcoin has not seen anything fundamentally change. Yes, there is talk about the Federal Reserve perhaps pivoting, but I think it’s going to take a while before we see that happen, and a lot of people are perhaps getting ahead of the curve.

The $24,000 level has seen a couple of shooting stars form there, and it’s possible that we could see that act as a massive barrier. Having said that, if we were to break above those shooting stars, then it’s likely that the market goes looking to the $28,000 level. The $28,000 level was previous support, so it’s very likely to be resistant now.

If we break it down below the 50-day EMA, then Bitcoin is likely to reach the $20,000 level. The $20,000 level underneath is significant support that extends down to about $18,000. If we were to break down below that level, then it’s likely that Bitcoin could go looking to the $12,000 level. The $12,000 level would mark a major “round trip” for this market. In other words, it will have wiped out the entire bullish market that we had over the last several years.

Pay attention to the US dollar, because it can have a huge negative correlation to this market, and it’s likely that we would see the US Dollar Index diverge from this market as well. Either way, even if we were to be getting ready to turn the entire trend around, we have so much in the way of room and time at this point that I’m not particularly rushed to get involved in this market anytime soon as far as a buying opportunity is concerned.

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We would need to recapture all of the real estate given up on Tuesday this week to show a significant change in attitude.

• Gold markets initially shot higher on Friday but gave up gains again.
• The price seems unable to hang onto positive momentum.
• At this point, the market looks as if any rally will be sold into.

But even if we do rally from here, I would anticipate that there is a lot of resistance at the $1800 level as well, which is an area that has been imported multiple times in the past, as well as an area that carries a lot of psychology attached to it.

If we were to break down below the lows of the last couple of days, then it’s possible that the market could go looking to the $1700 level underneath, which is the next major, round, psychologically significant figure. Keep in mind that the US dollar has a directly negative correlation to gold markets most of the time, and interest rates most certainly do. As interest rates continue to climb in the United States, that will have a negative effect on gold.

Bounce Expected, But Will Gold Recover?

That being said, I would anticipate some type of bounce sometime soon, as we had fallen apart so rapidly. The alternate scenario is that we simply go sideways, which is an even more bearish turn of events because it shows that nobody’s really willing to step in and pick this market up. If interest rates in America continue to climb the way they have, it’s very difficult to imagine how gold will do well. With that being the case, I like the idea of fading rallies more than anything else, but I would short the market if it broke down from here.

As far as the market changing its overall attitude, we would need to recapture all of the real estate given up on Tuesday this week to show a significant change in attitude. If and when we get that, then the market will have to deal with the 50-day EMA as well as the 200-day EMA. In other words, it’s going to take a lot of effort to recover from here. The biggest driver will be expectations coming out of the Federal Reserve, which right now looks likely to be very tight going forward, thereby putting the interest rate pressure on the gold market in general.