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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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.

The pair will likely continue falling as sellers target the second support at 1.1770.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.1770.
• Add a stop-loss at 1.2020.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.2010 and a take-profit at 1.2110.
• Add a stop-loss at 1.1830.

The GBP/USD pair declined sharply in the overnight session as investors rushed to the safety of the US dollar. The price declined to a multi-month low of 1.1892, which was substantially lower than last week’s high of 1.2331.

USD as Safe Haven

The GBP/USD pair declined sharply as the US dollar strength continued. The US dollar index rose to a multi-decade high of $106.40 as demand for the greenback continued. This rally happened as concerns about the health of the global economy continued.

For example, on Tuesday, Andrew Bailey, the head of the Bank of England (BOE) warned that the country’s economy was deteriorating at a faster pace than expected. He noted that the wage growth was still slow even as inflation jumped to the highest level in four decades. This explains why consumer confidence has tumbled in the past few months.

Therefore, the BOE is under intense pressure as the country goes through its first stagflation in decades. The bank has opted to continue with the aggressive rate hike policy while risking a recession.

Indeed, data published on Tuesday showed that the country’s business output declined in June. Services PMI dropped to 54.3 while the composite PMI fell to 53.7. While these numbers are above 50, they signal that activity is slowing. Other recent data from the UK like retail sales and house prices ave been disappointing.

The next key catalyst for the GBP/USD pair will be the upcoming minutes by the FOMC. During that meeting, the members voted to hike interest rates by 0.75% in a bid to fight inflation. Therefore, these minutes will provide more color about the deliberations during the committee.

The Bureau of Labor Statistics will publish the latest job openings data. Analysts expect the numbers to reveal that the country’s openings rose fell to 11 million.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair made a strong bearish breakout in the overnight session. It dropped and tested the first support of Woodies pivot point. The pair then moved below the 25-day moving average while the Relative Strength Index has pointed downwards. It also declined below the important support level at 1.1943, which was the lowest point on June 14th.

Therefore, the pair will likely continue falling as sellers target the second support at 1.1770. A move above the resistance at 1.200 will invalidate the bearish view.

The outlook for the pair is bearish, with the next key support being at 1.2350.

Bearish View

• Sell the GBP/USD and set a take-profit at 1.3550.
• Add a stop-loss at 1.2600.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2525 and a take-profit at 1.2625.
• Add a stop-loss at 1.2450.

The GBP/USD pair pulled back signaling that the recent recovery trade has ended. The pair declined to a low of 1.2454 as the Fed started implementing its quantitative tightening program and as investors positioned themselves for the upcoming jobs data.

US Dollar Strength

The GBP/USD pair declined as the US dollar index continued making a comeback. The closely-watched dollar index rose by more than 0.80% while the CBOE volatility index rose by 5%.

At the same time, American equities turned lower, with the Dow Jones and Nasdaq 100 shedding more than 1%. This was a sharp reversal since they were all in the green when the market opened.

The main catalyst for the performance was that the Fed has started reducing its balance sheet gradually. It will scale down its assets by about $47.5 billion per month and then double the amount later this year.

Investors are looking ahead to the upcoming US jobs numbers that are scheduled for the coming two days. On Thursday, ADP will release its estimate of the jobs created by the private sector. Analysts expect these numbers to show that the economy added over 300k jobs in May.

As you recall, some of the biggest employers like Walmart and Target warned that they would start scaling back their employees. They noted that they had overhired during the pandemic boom.

The official jobs numbers will come out on Friday. Analysts expect these numbers to show that the economy added over 320k jobs in May while the unemployment rate declined to 3.5%. With inflation surging, the most important data to watch will be on wages, which are expected to have grown by 5.2%.

The GBP/USD pair also declined after signs emerged that the UK housing market was slowing down as the cost of borrowing rose.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair formed a rising wedge pattern recently. Historically, this pattern is usually a bearish sign. The pair managed to move below the lower side of the wedge pattern this week.

Also, it fell below the 25-day and 50-day moving averages and is now approaching the 23.6% Fibonacci retracement level. The MACD has moved below the neutral point. Therefore, the outlook for the pair is bearish, with the next key support being at 1.2350.

DOT/USD has continued to fall and is traversing extremely important support levels in early trading this morning as buyers seem to have disappeared.

DOT/USD is trading near the 9.7000 price as of this writing.  DOT/USD was trading near the 10.7500 mark as late as the 23^rd of May, this after climbing back from a low of 9.1600 seen on the 19^th of May. On the 12^th of May DOT/USD did trade below the 7.0000 level temporarily. While optimists, if any are left, may proclaim the ability of Polkadot to climb higher off of these lows was an accomplishment, even they might not proclaim it a victory.

DOT/USD remains locked in an aggressive long term bearish trend.  Let’s please recall in late October of 2021 DOT/USD was trading near the 55.0000 level. The fall from these apex highs mirrors the results of the major cryptocurrency market, and it also reflects the seemingly dubious fact that speculative buyers are in very short supply.

DOT/USD is traversing values today, which were last traded in January of 2021.  Technically this is significant because it shows DOT/USD is trading below the over exuberant prices which started to develop in earnest around the middle of January in 2021, when prices in the digital asset sphere started to launch upwards across the board. In early February of 2021 DOT/USD was trading near the 20.0000 mark. If prices continue to slump and additional ‘supposedly’ support levels crumble, if would not be utterly shocking to see DOT/USD trade near the 6.0000 mark again and potentially even lower.

While backers of Polkadot may say its current price is vastly oversold, the lack of buyers able to produce a significant reversal higher is troubling.  If speculative buyers do not show an appetite for DOT/USD there is reason to suspect the cryptocurrency could falter more. A low of around 9.5000 was demonstrated early this morning and if this level erodes, technically traders should begin to think about important psychological marks if lower prices are sustained. This means numbers like 9, 8 and 7 could be considered in USD values.

Speculators should remain cautious and realistic about their ambitions. The price velocity of DOT/USD has not been ultra-powerful, but its inability to trade over the 10.0000 ratio could prove significant if this value starts to look like it will not be flirted with in the short term. Traders need to use solid risk management as sellers, and make sure they use entry price orders to meet expectations via their fills. Looking for more downside action with DOT/USD appears to be the logical wager near term.

Polkadot Short-Term Outlook

Current Resistance: 10.3400

Current Support: 9.5300

High Target: 11.2600

Low Target: 7.9800

The pair will likely keep rising as investors target the 50% retracement level at 1.0765.

Bullish View

• Buy the EUR/USD pair and set a take-profit at 1.0800.
• Add a stop-loss at 1.0600.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.0600 and a take-profit at 1.0500.
• Add a stop-loss at 1.0700.

The EUR/USD price continued its bullish momentum after the hawkish note by Christine Lagarde. It also rose as volatility in the market declined, dragging the US dollar. It is trading at 1.0680, which is the highest it has been since April 26th.

ECB Tightening

The ECB has been embraced a more cautious tone than other major central banks. While the Fed, RBA, and BOE have all hiked interest rates, the ECB has failed to do so. Instead, the officials have focused on lowering the pace of easing in the past few meetings. As a result, this posture has dragged the EUR/USD close to its parity level against the US dollar.

The situation is now changing, if recent statements by ECB’s officials are to go by. Last week, the head of the German central bank recommended that the bank should start moving in its July meeting. In a separate statement, the head of the Dutch central bank said that the bank should deliver a giant 0.50% hike in a bid to fight inflation.

On Monday, Christine Lagarde penned a lengthy statement explaining her thoughts on tightening. She noted that the bank would start hiking interest rates in July and exit negative rates territory in September. This explains why the EUR/USD pair has risen sharply in the past few days.

The pair will therefore react to a statement by Lagarde that will happen during the American session. In it, she will likely talk more about her thoughts on how rapidly the bank will move from the era of easy money.

Meanwhile, the EUR/USD pair will react to a statement by Jerome Powell. Like last week, the Fed chair will likely reiterate on the bank’s policies. The top economic data to watch will be new home sales and EU and US flash PMIs.

EUR/USD Forecast

The EUR/USD has staged a strong comeback in the past few days. During this time, the pair has managed to move above the important 38.2% Fibonacci retracement level. It has also jumped above the important resistance level at 1.0640, which was the highest level on May 5th. The pair has moved above the 25-day moving average while the Stochastic Oscillator has moved above the overbought level.

Therefore, the pair will likely keep rising as investors target the 50% retracement level at 1.0765. A drop below the support at 1.0600 will invalidate the bullish view.

During last week’s trading, the price of the USD/JPY currency pair was exposed to profit-taking operations. It moved towards the support level 127.52 after the currency pair recorded its highest level in 20 years. As mentioned with the selling operations, forex investors may think of buying the currency pair as it returned to move towards the resistance level 129.45. The pair is stable near it at the beginning of this week’s trading. The US dollar is still supported by strong expectations of the path of raising US interest rates strongly during 2022.

Wall Street markets ended another volatile week of trading with a broad rally on Friday, although it wasn’t nearly enough to keep the market from its sixth consecutive weekly decline, the longest such streak since 2011. According to the performance, the S&P 500 rose by 2.4%. More than 90% of the companies listed in the benchmark index closed higher. The Nasdaq rose 3.8% as additional gains in technology stocks helped lift the index. The Dow Jones Industrial Average rose 1.5%.

Overall, the optimistic end still leaves indices with weekly losses of more than 2.4% each, extending the weekly series of declines to six weeks for the S&P 500 and Nasdaq, while the Dow recorded its seventh consecutive weekly decline. Markets have been tumbling since late March as investors fear that the Federal Reserve may not succeed in its delicate task of slowing the economy enough to rein in the highest rate of inflation in four decades without causing a recession.

While there were surprising gains along the way, including a 2.5% gain for the S&P 500 in late April and a 3% gain in early May, the market has continued to slide since hitting an all-time high at the beginning of May. This is not an unusual pattern on Wall Street when indices are close to entering a bear market, or down 20% or more from their most recent peak. The closest the S&P 500 index to a bear market this year was last Thursday, when it finished 18.1% below its January peak.

In general, companies struggle to keep up with the increasing demand for a wide range of products and commodities amid production and supply chain problems. They have raised prices on everything from food to clothing, which has been putting pressure on consumers and raising concerns about falling spending and slowing economic growth.

The Fed, for its part, is trying to dampen the effect of rising inflation by pulling the benchmark short-term interest rate from a record low near zero, where it has spent most of the pandemic. He also said that it may continue to raise interest rates by twice the usual amount in upcoming meetings. Investors worry that the central bank could cause a recession if it raises interest rates too much or too quickly.

The Ministry of Labor issued reports this week confirming persistently high consumer and wholesale prices affecting businesses. Meanwhile, China’s decision to shut down major cities amid concerns about a resurgence of the coronavirus has further strained supply chains, and Russia’s invasion of Ukraine has pushed up already high energy and food costs globally.

According to the technical analysis of the pair: The return of the price of the US dollar against the Japanese yen to stability above the 130.00 psychological resistance. The bulls will restore the momentum to return to the move towards record ascending levels again. The closest resistance levels for the currency pair are currently 130.00, 130.85 and 131.35, respectively. On the other hand, according to the performance on the daily chart, breaking the support 126.40 will support the bears to move downwards, and at the same time, it will be an opportunity to think about buying the currency pair again.