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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• 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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Despite the announcement of the US interest rate hike, as expected, the price of gold gained momentum and rose towards the resistance level of 1740 dollars an ounce. The US dollar declined following the comments of Federal Reserve Governor Jerome Powell following the decision. The price of gold is stable around the level of 1734 dollars per ounce at the time of writing the analysis. Speaking at a news conference after the Fed’s latest policy meeting, Bank Chairman Jerome Powell stressed that the US central bank remains committed to defeating chronically high inflation. Meanwhile, concern that the Fed’s efforts may eventually cause a growing recession as consumers and businesses suffer from higher prices and increased borrowing rates. Powell missed several opportunities to say the Fed would slow its gains if a recession occurred while inflation was still high.

But Powell also said that the pace of the Fed’s hikes may slow in the coming months now that the key interest rate has almost reached a level that is believed to neither support nor constrain growth. The suggestion helped spark a strong rally in Wall Street markets, with the S&P 500 stock market index up 2.6%. The prospect of lower interest rates in general is fueling stock market gains.

Meanwhile, Powell was careful during his press conference not to rule out another three-quarter point increase when Fed policymakers meet next September. He said that the interest rate decision will depend on what will emerge from the many economic reports that will be issued from time to time. “I don’t think the United States is in a recession,” Powell added at his press conference, noting that the Fed’s rate hike has already had some success in slowing the economy and possibly easing inflationary pressures.

Economic Outlook Today

The Commerce Department said US durable goods orders jumped 1.9% in June after rising 0.8% in May. The continued increase surprised economists who had expected durable goods orders to fall by 0.4%. Excluding a sharp rise in transportation equipment orders, durable goods orders rose 0.3% in June after a 0.5% increase in May. Economists had expected previous transfer orders to rise 0.2%.

Meanwhile, a separate report from the National Association of Realtors showed that pending home sales in the US fell sharply in June. NAR said its pending home sales index fell 8.6% to 91.0 in June after rising 0.4% to a revised 99.6 in May. Economists had expected pending home sales to decline 1.5% compared to the 0.7% increase originally recorded for the previous month.

Today’s XAU/USD Gold Price Forecast:

There is no doubt that the recent move in the price of gold after the announcement of the US interest rate hike is important for the bulls to control the direction of gold. The rise may be stronger if prices move towards the resistance levels of 1755 and 1778 dollars, respectively. As I mentioned before that the last level is important to move towards the level of psychological resistance 1800 dollars, which is of interest to change the general trend to the upside.

On the other hand, the return of the gold price to the vicinity of the support level of 1710 dollars for an ounce is important for the bears to control the trend further. The price of gold will be affected today by the announcement of the growth rate of the US economy.

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In the short term, it seems very unlikely that Ethereum will give you the possibility of big gains.

Ethereum fell again on Tuesday as we continue to see a lot of negativity in crypto markets. Ethereum sees the $1250 level as resistance, and it’s not a huge surprise to see that we are not able to retest that area. The $900 level underneath could be the target, and if we were to break down below there, I think we’ve got a situation where Ethereum will fall much further. Breaking below that level is my base case scenario, but when we get there is a completely open question.

If we would do break down below the $900 level, it’s likely that the market could go down to the $500 level, which is an area where we had seen a little bit of back and forth previously. Because of this, that is my target, and I will be waiting until we get down there in order to start buying. The $500 level begins a massive support level down to the $400 level and would represent a complete “round-trip” of the entire bullish move. I don’t think that this is a market that looks healthy, nor do I believe that the cryptocurrency markets will turn around due to the fact that the Federal Reserve continues to tighten monetary policy.

With a tight monetary policy, risk assets such as cryptocurrency will continue to suffer at the hands of money running away from risk. Risk aversion is like cancer that ripped through the markets, going from one market to the next. Cryptocurrency is far out in the risk spectrum, so I think Ethereum continues to suffer due to this phenomenon. Furthermore, the rollout of “Ethereum 2.0” continues to drag its feet, which is not exactly a positive sign for the market. Don’t get me wrong, I do believe that eventually the entire upgrade will continue and improve the market, but we are not in the right circumstances to see cryptocurrency take off to the upside.

There will come a time when crypto starts to strengthen again, and when it does there will be profits to be made. Ultimately, this is a situation where you may have the possibility of huge windfall profits over the longer term, but in the short term, it seems very unlikely that Ethereum will give you the possibility of big gains.

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.

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.

Shorting is not a possibility at this point.

The West Texas Intermediate Crude Oil market has fallen rather hard, to begin with on Thursday but turned around to show signs of life just above the $110 level. By doing so, the market looks as if it is trying to break out and reach above the $120 level eventually. That being said, what’s worth noting is that we had seen the ascending triangle for the market hold as support during the session on Thursday, so it looks like we are going to continue to see buyers on dips. Ultimately, I think this market will go looking to the $120 level as a potential target.

If we turn around and break down below the $110 level, that would obviously be a very negative turn of events but I think at this point we probably have quite a bit of volatility to chew through, especially as the jobs number comes out on Friday. Because of this, I think that any debt will have to be looked at as potential buying opportunities, just as we have seen over the last couple of weeks. If we can break above the $120 level, then the market is free to go back to the highs again.

Crude oil will continue to get a bit of a bid as the Chinese are reopening their economy, thereby driving up demand. The market has shown itself to be very noisy, but it is resilient. I think that continues to be the case as there are so many moving pieces right now that it’s almost impossible to get a grip on everything that moves. After all, the concern about global growth slowing down and then the concern about inflation at the same time has made the market messy to say the least. At this point, it’s difficult to imagine a scenario in which things are going to be easy, so please keep that in mind. Ultimately, this is a market that I think will have to figure out its next move through a “wall of worry”, but it certainly looks as if we are focusing on the upside instead of the down. With this being the case, I would anticipate that the market will eventually hit $130, but it may be quite an adventure getting there. Shorting is not a possibility at this point.

Keep an eye on volatility and risk appetite, because it will give you an idea as to whether or not we are going to sell off for the day or turn around and try a counter-rally. 

The euro fell a bit on Wednesday as we continue to see more of a “risk-off” type of move in the market. The euro did get a bit of a reprieve during the previous session, but every time we rally it is likely that we will continue to see plenty of sellers running back into the US dollar. The US dollar continues to attract a lot of inflows due to the interest rate differential, and of course, the fact that the Federal Reserve has reiterated its willingness to “go beyond the neutral rate” to fight inflation.

On the other side of the Atlantic Ocean, you have the European Central Bank which has to fight a slowing economy, and is likely to remain much looser than the Federal Reserve. The market has been negative for quite some time, and I just do not see that changing anytime soon. Any time we rally, I will be looking to short the euro on short time frames. The 1.06 level above offers quite a bit of resistance as well, so I think this is a market that cannot be bought anytime soon.

If we were to break above the 1.06 level, then I think the market would have to deal with the 50-day EMA which is currently breaking down below the 1.08 level. The 1.08 level is previous support which should now be resistance based on the “market memory.” The market breaking above there is going to take a huge Herculean effort, something that I do not see happening anytime soon. In fact, based upon the bearish flag that we recently formed, you can extrapolate the move down to the 1.00 level, perhaps even slightly lower.

Keep an eye on volatility and risk appetite, because it will give you an idea as to whether or not we are going to sell off for the day or turn around and try a counter-rally. While the candlestick on Wednesday was not necessarily huge, it reiterates the overall attitude, so it is likely that we would see plenty of people willing to jump on board. If the Federal Reserve changes its tune, we may see this market reverse, but we are so far from that right now as inflation is raging, that I just do not see it happening.

I think this is more likely than not going to be a short-term rally that can get sold into.

The French DAX Index initially fell on Monday but found buyers underneath at the €6280 level. The market continues to find buyers, and it looks as if it is going to try to get to the 50-day EMA. The market is sitting just below the €6500 level and drifting lower. In fact, you could also make a bit of an argument for the 50-day EMA offering a downtrend line, that you could use as dynamic selling pressure.

Keep in mind that the CAC is essentially a luxury index, so it needs more risk appetite out there to push the market to the upside. The Parisian index has been sold off quite viciously, and at this point, a bit of a relief rally would make quite a bit of sense. However, that does not necessarily mean that we are going to be seen this market rally easily, and it certainly could set up a potential selling opportunity as well. The €6500 level would make sense as an area where there will be a bit of a built-in barrier, and any signs of exhaustion will almost certainly get jumped upon. On the other hand, if we break down below the bottom of the candlestick for the trading session on Monday, that would open up a fresh round of selling as well. At that point, I would anticipate that the market could drop down to the €6000 level.

Any breakdown below the €6000 level would open up a lot of selling pressure to send this market down to the €5800 level. In general, this is a marketplace that I think will continue to be noisy, so keep in mind that you need to keep your position size reasonable as the volatility is going to be all over the place, not only here but in just about anything else that is traded in the markets right now. As long as we continue to see a lot of concerns globally, this is a market that will be tenuous at best. I think this is more likely than not going to be a short-term rally that can get sold into. Ultimately, this market that looks likely to be a shorting opportunity given enough time, but one has to watch momentum as it is crucial.