I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing.

• The AUD/USD currency pair rallied significantly on Wednesday as the CPI number came out much cooler than anticipated.
• Because of this, the idea is that the Federal Reserve can start to pivot a bit, but it’s very unlikely to happen. After all, inflation is 3 ½ times what the Federal Reserve looks for, so they are going to continue to be very tight.

Strong Candlestick

The size of the candlestick is very strong, and it does suggest that we have a little further to go. At this point, the market looks as if it is going to threaten the 200-day EMA, as it is now below the 0.72 level and grinding lower. I think that could be a bit of difficulty trying to hang onto, and I think it’s probably only going to offer a lot of trouble. Signs of exhaustion will get sold into, due to the fact that the US dollar continues to be highly sought after in general, especially as we have a major recession ahead of us.

If we do break above the 0.72 level, then possibly we could see this move all the way to the upside. At that point, we could see the 0.76 level. I just don’t see that happening though, and it’s likely that the market is going to run into exhaustion before we get there. If we break down below the 50-day EMA, that opens up the possibility of a drive down to the 0.69 level, which has been supported previously. Breaking below there opens up the possibility of a move to the 0.67 handle. That’s an area where we have been multiple times over the longer term, and it has offered a massive amount of support. Breaking below that level could open up a massive selloff and what would be a very negative turn of events for risk appetite overall.

I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing. That’s probably sage advice for just about any market right now, but the Aussie does tend to be very noisy, so that makes quite a bit of sense. The US dollar seems to be trying to recover against the euro and the British pound, so we will see what happens here.

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Longer term, I believe that the euro will reach parity, especially as we have almost no reason to think that in the longer term the Federal Reserve is going to change its overall attitude.

The euro went back and forth on Wednesday as the 1.04 level has offered a little bit of support. Initially, the ECB had gotten involved in the markets by opening up a potential can of worms by having an emergency meeting. However, nothing came out of it other than the ECB suggesting that the central bank would “do something” to keep interest rates down. That’s a strange way of saying quantitative easing, but at the end of the day we had more people focusing on the Federal Reserve and what it was going to do/say.

Ultimately, this is a market that I think continues to see a lot of noisy behavior, but a rally at this point should only open up a nice selling opportunity as the US dollar has been so strong for so long. The euro is going to continue to see a lot of volatility around it, and a bounce here does make a certain amount of sense because we had fallen so far previously. We have hit the suggested target from the falling wedge, so now the market may take a bit of a breather. Nonetheless, if we can break down below the lows that we just made, then it’s possible that we will go down to the 1.02 level.

Longer term, I believe that the euro will reach parity, especially as we have almost no reason to think that in the longer term the Federal Reserve is going to change its overall attitude. After all, inflation is very high in the United States, so the Fed will have to do everything it can to fight that battle. Jerome Powell even suggested that the next several central bank meetings are likely to feature interest rate hikes, so the United States dollar should continue to see plenty of interest.

Part of this may have been a bit of a relief rally for the euro, but I do think that in the longer-term the trends in all of the markets should continue to be intact. Quite frankly, this should give us an opportunity to follow the same trends, after the market comes down and gives it a bit of a rethink. In fact, it’s not until the Euro breaks above the 1.09 level that I would look at this as a change in trend.

While I do believe that Bitcoin will be a good investment longer-term, I also believe that you will get an opportunity to start buying at much lower prices.

Bitcoin has rallied ever so slightly during the trading session on Thursday, as we continue to hang about the $30,000 level. There does seem to be a certain amount of hope or wishful thinking going on out there, so be interesting to see how this plays out. Quite frankly, I think it is probably only a matter of time before something bad happens, but a bounce could be the first thing. In fact, I would not be surprised at all to see this market bounce, but I would also anticipate a lot of selling pressure above.

As long as there is an institutional desire to own US dollars, mainly as a function of the Eurodollar system, it is going to be difficult for Bitcoin to attract a lot of major inflows. Yes, some retail traders will live and die by Bitcoin, but they do not move the market. In fact, the people who do move the market are shunning Bitcoin as a lot of them have just been eviscerated and other crypto markets.

If we break down below the bottom of the candlestick from last week which is at roughly $25,854, this market will make a beeline towards the $25,500 level, and then eventually the $25,000 level after that, dragging the rest of the crypto markets down with it. A lot of what you are seeing here is due to US dollar strength, and a general “risk-off” type of attitude around the world. I find it difficult to believe that a lot of money is suddenly going to go looking to get involved in these types of markets, as we need some type of stability in more traditional markets to even approach that type of environment.

While I do believe that Bitcoin will be a good investment longer-term, I also believe that you will get an opportunity to start buying at much lower prices. If we head into the type of buzzsaw recession I think is starting to be imagined, this will send the entire crypto market much lower. It is only when you have cheap central bank money that crypto gets a huge bid. After all, one of the huge tenants of crypto has been all of the central bank’s “printing of money.” (This is a ridiculous concept because money is not created by central banks, it is created by loans.) Leaving that aside, it is worth noting that the Federal Reserve is getting tighter, not looser.

The best-case scenario is probably going back and forth in the short term, trying to stabilize a bit.

The Dogecoin market fell on Tuesday to reach the $0.10 level, an area that would obviously attract a certain amount of attention, as these markets do tend to pay close attention to these round numbers. That being said, we have bounced from that area, which is a sign of the market trying to stabilize.

That being said, Dogecoin is what is known as a meme coin, meaning that it has no real use. There are a handful of places around the world that would take it as cash, but really at this point it is more or less driven by retail meme-based nonsense. That being said, you can still make money trading it and that is what I am focused on. If we break above the top of the candlestick, it is very possible that we could go looking to the 50-day EMA, which is at the $0.1365 level.

On the other hand, if we were to break down below the $0.10 level, it could have a major effect on the market, unwinding it down to drastically low levels. It is worth noting that Bitcoin did try to save itself at the $30,000 level, but if Bitcoin breaks down below $30,000, it is difficult to imagine that some of the smaller meme coins will do very well. At that point, I think Dogecoin will drop below $0.10 and goes much lower given enough time. In that scenario, Dogecoin could drop down to five cents, or perhaps even lower than that.

The best-case scenario is probably going back and forth in the short term, trying to stabilize a bit. The stabilization of Dogecoin is the first step in trying to turn things around, but it will need a certain amount of external pressure to make this happen. Right now, there seems to be a real lack of interest when it comes to cryptocurrency in general, so obviously, a smaller market like Dogecoin is going to suffer. The traders out there that are looking for a longer-term “buy-and-hold” opportunity should have plenty of time to get involved, so at this point, I do not necessarily think it is worth trying to get overly deep in this market, but if we see a change in the overall attitude of crypto, it would not take much to send Dogecoin much higher.

If we see Bitcoin and Ethereum start to sell off, then the rest of these markets will continue to fall as well. 

Litecoin fell a bit on Friday only to turn around and show signs of support. The market looks as if it is trying to form a bit of a hammer, which of course is a supportive-looking candlestick. Nonetheless, it is worth noting that the market continues to see sellers every time we rally, and Litecoin continues to show signs of downward momentum.

Furthermore, larger crypto markets are failing such as Bitcoin and Ethereum, and as long as that is going to be the case, it is very likely that these other crypto assets will continue to fall. The market breaking down below the bottom on the hammer could kick this market down to lower levels, perhaps down to the $80 level. We have been in a downtrend for quite some time, and I just do not see that changing anytime soon.

That being said, if we do rally from here, I think there are going to be a couple of areas that we need to pay close attention to. The $100 level would be the first barrier that we need to overcome, but if we can break above there then we will go looking towards the $106 level, an area where we have seen resistance earlier this week. Breaking above that opens up the possibility of a move to the 50-day EMA, currently sitting at the $111.65 level and falling.

It is not until we break above all of those areas that I would consider going long of Litecoin, because it continues to look very vulnerable, and it is worth noting that each successive high has gone lower, the very epitome of a downtrend. The question now is whether or not we are going to kick-off to the downside, essentially cementing the idea of a descending triangle. If we do, I anticipate that Litecoin will go much lower, perhaps down to the $75 level, maybe even lower than that.

If we see Bitcoin and Ethereum start to sell off, then the rest of these markets will continue to fall as well. After all, altcoin markets tend to be highly sensitive to the overall risk profile of traders, with crypto being far out of the spectrum, and the smaller markets are on the very end of the risk appetite spectrum.

I anticipate that given enough time, we break down even further.

The Euro has fallen a bit during the trading session on Thursday to Pierce below the 1.05 level. The 1.05 level of course attracts a certain amount of attention, and therefore it makes quite a bit of sense that we would see a little bit of a bounce. In fact, by the end of the day we did break back above the 1.05 level, perhaps helped in part by the fact that the GDP number was horrific in the United States.

The 1.05 level is an area that would attract a lot of attention regardless, and the fact that we have dropped that hard also suggests that we cannot simply slice through it. I think we get a short-term rally that will more than likely show a significant amount of resistance. That resistance will probably show up in the next couple of days, and therefore I think it offers a nice selling opportunity. Quite frankly, the US dollar has gotten a bit ahead of itself, so I think a little bit of profit-taking makes quite a bit of sense. This is especially true as we are heading into the weekend because nobody wants to be overly exposed while they cannot correct a position.

On the upside, the 1.08 level should be significant resistance, right along with the 50 Day EMA which is racing toward that level as well. Because of this, I think that we should get quite a bit of selling pressure if we come anywhere near the 1.08 level, something that I do not necessarily think that the market has in it. The interest rate differential between the United States and Europe continues to favor the United States, and with the Federal Reserve looking to fight massive inflation, is very likely that the US dollar will continue to attract inflows as bonds yield much more on the side of the ocean.

If the European Central Bank was able to get its attitude changed, it would start with the resolution to the natural gas problem. Quite frankly, an economy that has expensive or less natural gas than necessary is not an economy that is going to function healthily. There are far too many issues in the European Union right now to think that the currency will reflect strength. I anticipate that given enough time, we break down even further.

It certainly looks as if we are trying to form some type of reversal pattern, or perhaps even a topping pattern.

The NASDAQ 100 fell a bit on Tuesday to reach the bottom of the overall consolidation area. The 200-day EMA sits just below underneath the bottom of the hammer, and as a result, it is likely that the area could offer a significant amount of support. Ultimately, this is a market that is trying to figure out whether or not we are going to continue going higher, or if we are ready to pull back. Higher interest rates certainly will not help the overall attitude of the NASDAQ 100, so if we break down below that 200-day EMA, the market is likely to see a significant selloff. After all, the $15,000 level is an area that will attract a lot of attention.

If we were to break above the 15,250 level, it is possible that we could go higher, perhaps reaching the 15,500 level, maybe even the 16,000 level over the next several weeks. We certainly look as if we are trying to find out whether or not we are going to break above this area to confirm the bullish flag. On the other hand, if we were to break it down below here, it would show a complete rejection near the 50% Fibonacci retracement level, suggesting that we could make a run towards the bottom again over the longer term.

Keep in mind that stock markets, in general, continue to cause quite a few headaches, as the volatility has been somewhat out of control. At this point, we are trying to figure out whether or not the Federal Reserve is going to tighten drastically, because if they do it is likely that the stock markets around the world will continue to get sold off, especially these highflying technological stocks that make up the majority of the volume for the NASDAQ 100. Because of this, we are going to have to watch a handful of stocks even more significantly than most times. It certainly looks as if we are trying to form some type of reversal pattern, or perhaps even a topping pattern. Pay close attention to the rectangle we are forming it could give us a clue as to where we go next once we finally break out above it, especially if it is a long candlestick.

The market continues to see a lot of noisy behavior, but ultimately it looks as if we are trying to build up enough momentum to finally break out of this short-term range

The New Zealand dollar has rallied a bit during the trading session on Monday again, as we continue to consolidate below the 0.70 level to show signs of building pressure, but not quite enough momentum to continue going higher. Because of this, it looks as if the New Zealand dollar is currently “stuck” between the crucial big figure, and the 200 Day EMA, currently sitting at the 0.6875 level.

The New Zealand dollar is especially interesting, due to the fact that the market has a high correlation to certain agricultural items. Anybody who has been watching the futures markets understand that grains have done quite well, and this has had a bit of a “knock-on effect” on the New Zealand dollar. As agricultural commodities continue to find plenty of momentum, the New Zealand dollar could do so as well. However, we need to break above the 0.70 level to get any real momentum going, as it is a psychological and structural barrier.

If we were to break down below the 200 Day EMA, it is possible that we could break down even further, but it is worth noting that the 50 Day EMA is at the 0.6827 handle and moving higher. If we were to break through all of that, then I anticipate that the next move would be to reach down to the 0.6750 level.

On the upside, if we were to break above the 0.70 level, it opens up fresh buying, perhaps sending the market to the 0.71 handle, perhaps even the 0.7250 level above there, as we have seen in the past. The market continues to see a lot of noisy behavior, but ultimately it looks as if we are trying to build up enough momentum to finally break out of this short-term range that we are currently stuck in. The market breaking out of this area is ready to make a bigger move, but at this point we are killing time, perhaps trying to figure out who will win. I think this is a market that is most certainly worth paying attention to, because we are about to see a huge move in one direction or the other, depending on where the next impulsive candlestick points us. It looks as if we are building the inertia necessary for the next leg higher, or a pullback.