I think we are going to see a lot of noisy behavior over the next 24 hours, before continuing for all drift higher that we have been in for a while.

The USD/CAD initially fell during the trading session on Thursday but found a little bit of support underneath the show signs of life. It’s worth noting that the 50-Day EMA is sitting just below, and a lot of traders will pay close attention to that indicator. After all, longer-term traders consider that a short-term support level.

The fact that we ended up forming a bit of a hammer during the trading session on Thursday is interesting because we had formed an inverted hammer during the Wednesday session. In other words, the market is hanging around the 1.2950 level, an area that previously has been resistant, and therefore the market is trying to figure out what we are doing next. Jerome Powell is speaking at 10 AM on Friday at the Jackson Hole Symposium, and therefore a lot of people will be looking at the speech for signs of what the Federal Reserve may do next. Unfortunately, Jerome Powell has a long history of blowing up the statements and being misunderstood, because he’s not very good at his job.

Friday Session Likely to be Noisy

• The market breaking down below the 50-Day EMA opens up the possibility of the dollar dropping down to the 200-Day EMA, underneath the 1.28 level. On the other hand, if we can take out the 1.30 level on a daily close, it opens an attempt to reach the 1.32 handle.
• When you look at the longer-term chart, you can see that we have been drifting higher in a bit of a channel, and I would assume we you to do the same over the longer term.
• The session on Friday is likely to be very noisy.

The oil market has a certain amount of influence on the Canadian dollar as well, so if it starts to rise that may bring this pair down. However, all things lead to the Federal Reserve before it’s all said and done, so if we get some type of overly hockey statement, that could send this pair higher, just as more fumbling by Jerome Powell could send the market lower. I think we are going to see a lot of noisy behavior over the next 24 hours, before continuing for all drift higher that we have been in for a while.

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Every dip should be thought of as a potential buying opportunity.

The USD/JPY has fallen to kick off the trading session on Tuesday, but found enough support near the ¥136 level to turn around and form a hammer. This is a market that looks as if it is ready to go higher given enough time, but we may have a little bit of work to do in the meantime. After all, we have the Jackson Hole Symposium going on, and central bankers from around the world will be speaking. In other words, there’s a really good chance that there will be a lot of headline noise in the short term.

Breaking down below the bottom of the candlestick would make it technically a “hanging man”, but I don’t necessarily think that would be the end of the world. That will more likely than not send this market looking to the 50 Day EMA, and then perhaps even as low as the ¥132 level. It’s not really until we break down below that level that I would be concerned about the overall trend. This is a market that I think will find plenty of buyers between now and then, especially if interest rates continue to climb, like they have been in bond markets, not only in the US but worldwide.

Remember, the Bank of Japan has to worry about rising interest rates on the whole, because they need to keep the 10 year yield at 0.25% or lower. In other words, they need to print currency in order to buy “unlimited bonds.” With that being the case, it makes sense that the Japanese yen will continue to fall, and as a result every dip should be thought of as a potential buying opportunity.

Noises from Central Bank

• Keep in mind that there is a certain amount of a risk appetite play here, but the Japanese yen, although a safety currency, also has this noise coming from its own central bank.
• The US dollar is the world’s favorite safety currency as well.
• We may see this market go higher regardless of what happens next, unless of course there is some type of drastic change in the attitude of the Bank of Japan, something that they have shown very little interest in doing.

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I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside.

• The West Texas Intermediate Crude Oil market fell rather hard during the early hours on Monday, crashing into the previous support level of around $87.
• The $87 level has been important, so it’s not a huge surprise that we have bounced from there.
• Ultimately, the market has continued to defend this area, but it is more likely than not going to be an area that will eventually get broken.

Volatility and Downside Ahead

If we do break down below that area, then it’s likely that this market could get hammered, perhaps opening up a move to the $85 level, then followed by the $80 level, an area that obviously has a significant amount of psychology attached to it, and has quite a bit of historical importance as well. That being said, the market continues to see a lot of volatility, and typically volatility means that the market will eventually fall.

When you look around the world, there is a severe concern when it comes to global growth, as it seems to be disappearing. Any lack of growth is almost always shown up as negativity in the oil market, as demand should drop overall. I think that’s what is being priced in right now, so it is most certainly going to continue to be negative. That being said, we have seen a little bit of a bounce, and the volatility of oil will more likely than not continue to be a major factor.

It looks as if the $94 level above should continue to be resistance, and breaking above that would be a pretty strong sign. I don’t necessarily see that happening anytime soon, but it’s something to keep in the back of your mind. As things stand right now, it looks like we are grinding back and forth in order to try and find some type of consolidation pattern, but it most certainly seems to be favoring the downside in general. Because of this, I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside. The US dollar continues to be a very strong currency anyway, so I think it only makes sense that the oil markets will struggle to keep up against that type of massive momentum in the currency market.

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As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late.

• The US dollar pulled back a bit against the Japanese yen in early Monday morning trading only to turn around and show signs of support.
• By doing so, the USD/JPY currency pair looks very likely to continue going back and forth, with the ¥133 area offering a bit of support.
• In fact, the ¥132.50 level seems to be even more remarkable when it comes to buying pressure, so I think we are essentially “stuck in this area” for the time being.

USD/JPY Technical Analysis

Ultimately, the 50-day EMA sits above the crucial ¥135.50 level, and I think will continue to offer a little bit of a technical barrier. Because of this, I will be looking at that as a gateway to much higher pricing, and if the US dollar can climb above that level, it’s very likely that this market would continue to see quite a bit of bullish pressure. Ultimately, the dollar could go looking toward the ¥140 level, which is an area that I think offers psychological and structural resistance based on historical charts.

On the other side of the equation, if we were to break down below the ¥132.50 level, we could go looking all the way down to the ¥127 level for support. I would also anticipate that the ¥130 level will at least be of psychological importance, so we could see noise in that vicinity as well. I do believe that given enough time, this is a market that continues to be very noisy to say the least, so you have to be cautious about your position sizing, but it’s obvious that it’s going to be much easier to go to the uptside than to the down, as it is with the longer timeframe trend.

The interest rate differential in the United States continues to favor the greenback over the yen, but if it appears that the Federal Reserve will have to be a little bit looser with its monetary policy than once anticipated, that could put downward pressure on this market. As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late. In other words, the old correlations still remain, and it makes a certain amount of sense that we would see this play out in the same way.

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As long as we stay above the ¥132.50 level, not much is changed, and it looks bullish.

• The US dollar initially fell during the trading session on Thursday but found the support level that I had been talking about previously as reason enough to get long.
• The ¥132.50 level has held firm, and now it looks as if the USD/JPY currency pair is trying to go higher again.
• Keep in mind that this pair has been almost solely driven by interest rates, so you will need to keep an eye on the bond markets.

The US dollar has seen interest rates in America drop a bit, which of course has been negative for the greenback. However, we have also seen a little bit of stabilization, and that has helped the Japanese yen. The reason for that is that the Bank of Japan continues to defend the quarter percent peg on the 10-year bond, meaning that if interest rates start rising everywhere, that means that there is a bit of a “knock-on effect” in the Japanese bond market. Looking at this chart, you can see that we had been in a long-term uptrend and as the interest rates in America had been rising, we had seen the Japanese have to print more yen. This has been a perfect setup for this trade, and now it looks like we may continue to see that.

The 50 Day EMA sits above the highs from the trading session on Wednesday, so if we were to break above there, then it’s possible that we could see a bit more bullish pressure at that point as the market would start to see it as momentum building up. At that point, the market is likely to test the highs again, and perhaps even further. I think the ¥140 level could be a possibility, but it probably is going to take a significant amount of momentum to make that happen. I would anticipate a lot of noise, and therefore you will have to be very cautious about your position size. Ultimately, as long as we stay above the ¥132.50 level, not much is changed, and it looks bullish. If we break down below there, then we could be looking at a move all the way down to the ¥127.50 level. Either way, you will have to keep an eye on the bond markets, and interest rates as to where they are going.

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This has been a nice little pullback and I think a lot of traders will look at the US dollar as being relatively “cheap”, at least in the short term.

• The US dollar turned around against the Japanese yen on Tuesday as we had broken below the ¥132.50 level.
• The ¥132.50 level is an area that has previously been resistant and supported, so a certain amount of market memory comes into the picture.
• The fact that we have turned around so violently is a good sign, and I think we are going to continue to see the uptrend respected, as long as we don’t get some type of major selloff in the US dollar overall.

Keep an Eye on Bonds

Yields had been crushed for a while, and that has had a lot to do with what happened with the Japanese yen over the last couple of days. After all, a lot of traders started to recognize that the Bank of Japan may not have to be as aggressive in buying bonds as it had been previously, to keep yields down. If that’s going to be the case, then they may not have to “print” as many yen as thought. However, as you’ll start to rise again, the Japanese will have to start buying more bonds. So, there you have it, this is where we are right now, watching the bond markets trying to figure out where we are going next.

This pair tends to be particularly sensitive to the 10-year yield, which of course shot straight up in the air during the session. Because of this, we started to see the Japanese yen give up some of its gains as the central bank will have to get aggressive again if this ends up being a bit of a trend. Yields have quite a way to go because we are nowhere near the neutral rate in the United States.

Ultimately, I think that the uptrend needed some type of pullback, and we have had that. Whether or not this is it could be a completely different question, but right now this has been a nice little pullback and I think a lot of traders will look at the US dollar as being relatively “cheap”, at least in the short term against the yen, maybe some other currencies. In fact, we saw the US dollar pick up momentum against the euro and the pound at the same time, showing that this is a worldwide move.

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This pair does tend to be very choppy and sluggish most of the time, so you have to simply be set up in the right direction and wait for the market to make the move.

The euro initially fell hard on Friday, but found enough buyers underneath the 1.04 level to turn things around. By doing so, it looks as if it is hanging on for dear life in this area, perhaps getting ready to bounce yet again. If it does, I suspect that there will be plenty of sellers above to get involved and start shorting it at the first signs of exhaustion.

On that bounce, I would suggest that the 1.05 level could be an area of trouble, followed by the 1.06 level which should be even more difficult to get above. If we did get above the 1.06 level, then we are looking at an attempt to get to the 1.08 level, an area that should be quite difficult to get beyond. In fact, at that point I would even consider a potential trend change forming.

The Federal Reserve continues to find plenty of reasons to tighten the monetary policy in America, and that will have a major influence on what happens with the US dollar, and by extension with this currency pair. Because of this, I don’t see the trend changing anytime soon, and I believe that the euro also has its own issues. One of the most obvious issues right now with the euro that ECB has to worry about energy supply and inflation at the same time. That’s quite a tricky situation you find yourself in, so I think that it is unlikely that the euro will rally on a sustainable course.

If we were to break significantly lower, the first target below would be the 1.02 level, followed by parity. I do anticipate that we will see parity sometime this summer, but when that happens I do not know. After all, this pair does tend to be very choppy and sluggish most of the time, so you have to simply be set up in the right direction and wait for the market to make the move. Whether or not we get below parity is a completely open question at this point, something that I suspect is a question that we will be asking ourselves near August or September. On the other hand, if the Federal Reserve changes its overall attitude, that could change the overall trend in this currency pair, as well as many others.

Bitcoin will likely continue its bearish trend as sellers attempt to move below $20,000. 

Bearish View

• Sell the BTC/USD pair and set a take-profit at 19,500.
• Add a stop-loss at 21,500.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 21,300 and a take-profit at 23,000.
• Add a stop-loss at 20,000.

The BTC/USD pair retreated slightly as demand for Bitcoin and other cryptocurrencies waned. Bitcoin dropped from last week’s high of $21,846 to a low of $20,700. This price is about 18% above the lowest level this month.

Bitcoin and Stocks Waver

Bitcoin retreated in the overnight session as investors watched the performance of the stock and bond market.

In the United States, the Dow Jones index declined by 80 points while the Nasdaq 100 fell by more than 80 points. This was a sharp reversal considering that stocks rose sharply on Friday last week. Stocks have a close correlation to cryptocurrencies recently.

Meanwhile, Bitcoin pulled back as the bond market continued its sell-off. The yield of the 10-year government bonds rose to 3.20% while the 30-year rose to 3.145%. Bond yields have an inverse relationship with prices.

This performance is mostly because of the hawkish tone by the Federal Reserve. The bank has already hiked interest rates by 150 basis points this week and analysts expect that it will continue hiking in the coming months. It has also started implementing quantitative tightening.

The BTC/USD pair also wavered as demand from retail and institutional investors remain under pressure. The number of new account openings has dropped sharply in the past few days. Similarly, Bitcoin funds have seen significant outflows during the sell-off. The number of Bitcoin accounts has been dropping.

Further data shows that Bitcoin’s put to call ratio is hoverning near its highest level this year. A high ratio is usually a sign that more investors are placing bearish trades in the options market. In contrast, Ethereum has seen its ratio drop to the lowest level since January this year.

BTC/USD Forecast

The three-hour chart shows that the BTC/USD pair has been moving sideways in the past few days. This is a sign that bulls have struggled pushing the pair above last week’s high of 21,888. It has moved slightly below the 25-day and 50-day moving average. Bitcoin has also moved below the 23.6% Fibonacci Retracement level while the Stochastic Oscillator has moved to the oversold level.

Therefore, after facing substantial resistance, Bitcoin will likely continue its bearish trend as sellers attempt to move below $20,000. On the flip side, a move above the resistance at 21,888 will signal that bulls have prevailed and push it higher.

As things stand right now, this market looks as if it will continue to be bought every time it dips significantly.

The West Texas Intermediate Crude Oil market initially fell during the trading session on Thursday as the market approached the crucial 50 Day EMA, and the $112 level. The market had broken below the top of the previous ascending triangle but has found enough buyers in that area to turn things around. In fact, it looks as if the market is going to continue to climb from here and perhaps go to the $120 level in the short term.

If we can break above the $120 level, then it’s likely that we will see this market attempt to get back to the $124 level, and further. The oil market has been very bullish for quite some time, and nothing has fundamentally changed the outlook for oil in the meantime. Yes, China locked itself back down, and that could in theory at least drive down a little bit of the demand. However, we spent the last two years not drilling, so it makes a certain amount of sense that we would see a serious imbalance in the markets. Furthermore, there’s still the problem in Ukraine with the war and the fact that a lot of Russian oil has been taken off the market.

At this point, it looks as if the oil market will continue to attract a lot of inflow, but it’s probably worth noting that it’s a very crowded trade. Crowded trades can have vicious pullbacks occasionally, so you need to be cautious on that front. That being said, the market is likely to continue going much higher, reaching the $130 level initially, perhaps even $135 over the next several months.

On the other hand, if we were to turn around a break down below the bottom of the previous triangle, that would be a very negative turn of events, by breaking through multiple support levels. In that scenario, I would anticipate that the WTI Crude Oil market would fall apart as everybody would be running through the exits at the same time. It’s very difficult to imagine that happening, but it is something that you need to keep in the back of your mind. As things stand right now, this is a market that looks as if it is one that will continue to be bought every time it dips significantly.

Expect a lot of choppiness on Friday.

The US dollar initially fell during the trading session on Thursday but found buyers underneath to show signs of life yet again. Ultimately, this is a market that I think will have plenty of buyers regardless, as the Bank of Japan continues to work against yields in the bond market, meaning that they are essentially “printing Japanese yen.” If that’s going to be the case, then it makes quite a bit of sense that we would see other currencies benefit.

Furthermore, the Federal Reserve is much tighter than the Bank of Japan and is considered to be one of the most hotly central banks in the world. Because of this, it makes sense that the US dollar would continue to gain against the Japanese yen, and it is also worth noting that the US dollar is the currency in which most people measure strength or weakness, and therefore it does make quite a bit a sense that we would see this pair be the first one that people focus on.

However, if we continue to see the US dollar soften against other currencies, you may be better off buying something like the AUD/JPY or even the NZD/JPY as commodity markets have been so strong. Either way, this is a market that I have no interest in shorting, and I think that if we get a pullback during the Friday session, it’s very likely that the markets will look at that as a potential buying opportunity. The ¥126.50 level is an area that I think offers a significant amount of support, just down to the ¥131 level above offers resistance. Nonetheless, we are in a major uptrend, and therefore it makes sense that we would see plenty of momentum still in this market. I think that given enough time, we will probably have plenty of real estate to capture, over the longer-term more than anything else. I don’t have any interest in shorting, at least not until we take out the ¥125 level underneath, something that does not look very likely to happen anytime soon. Expect a lot of choppiness on Friday, as is pair is highly sensitive to the jobs report, but at the end of the day I would anticipate that any selloff attracts buyers as there have been so many recently.