I have no interest in buying this pair anytime soon, at least not until the fundamental situation changes.

The GBP/USD initially tried to rally during the training session on Friday but gave back early gains as Jerome Powell made it abundantly clear that the Federal Reserve was going to remain very tight and continue to focus on inflation, not other economic indicators.

As a result, the US dollar spiked during the trading session, and it now looks as if we are going to see the next big move in favor of the greenback and of course a significant “risk off” type of move. The market breaking down below the lows of the last several sessions could open up a move down to the 1.15 level. The 1.15 level is my longer-term target, but it is more likely than not going to be very noisy. Any rally at this point in time still continues to look suspicious at best, and the 1.20 level could be the next area of resistance. That being said, the 50 Day EMA sits just above there as well, so it would make a significant amount of sense that we would see sellers in that area if we do rally. Ultimately, I think it’s going to be difficult to break above all of that, let alone even go higher.

Market Likely to Drift Lower as Britain Enters into a Recession

• This is a market that has been in a downtrend for quite some time,
• It makes sense that we would see a continuation of this trend for the time being.
• The market certainly has shifted to the downside during the day, and I think it’s probably only a matter of time before we pick up momentum to the downside on any rally.

The Bank of England has already stated that the British economy is going to go into a recession, so there are no surprises there. In that scenario, it’s likely that the Bank of England is done doing any type of tightening, as the economy is going to be too fragile. The market will ultimately be a situation where there is no real reason to buy this market, and therefore I will be waiting for opportunities every time we rally. This was an excellent shorting opportunity on Friday, and it’s likely that we continue to see negative pressure going forward. I have no interest in buying this pair anytime soon, at least not until the fundamental situation changes.

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This is a situation where we have seen a nice recovery, but at this point, we are still very much in a downtrend.

• The Bitcoin market had initially tried to recover during the trading session on Wednesday.
• It then gave back gains to show signs of exhaustion.
• The Bitcoin market has been relatively positive for a while, but Bitcoin does not work by itself and lives in a vacuum.

The $25,000 level above continues to be difficult, and therefore I think if the market were to pay close attention to that level as we have been for a while, it does make a certain amount of sense that we have seen a lot of trouble yet again. In fact, I believe that the $25,000 level might end up being the top, but we will have to wait and see what the bond market does. This is because Bitcoin does not work outside of the rest of the financial world anymore. After all, there has been a lot of institutional money flying into the market, which has been good for the price previously, but it also means that Bitcoin will start to act like a more mature financial asset.

The shape of the candlestick is a bit of a shooting star, and therefore it shows that exhaustion may continue to be a problem. The 50 Day EMA sits below current pricing, near the $23,434 level, and is rising. You need to pay close attention to the bond market, because the yields rising will make a negative environment for risk appetite, and then by extension some of these more volatile assets such as cryptocurrency. This is what happens when the big players enter a market.

However, the Federal Reserve and other central banks are going to be meeting in Jackson Hole next week, and it’s possible that we could see the central banks try to talk down the markets going forward. This is a situation where we have seen a nice recovery, but at this point, we are still very much in a downtrend. If we break down below the 50-Day EMA, then it’s possible that the market could go down to the $20,000 level at that point, as it is a large, round, psychologically significant figure, and makes for a nice target. On a breakout above the $25,000 level, the next major resistance barrier is found at the $28,000 level.

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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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The decline in US inflation rates, stronger than expected, negatively affected the path of expectations of raising US interest rates in the coming months. Yesterday’s numbers caused the US dollar to decline, and therefore the XAU/USD gold price had the strongest opportunity to rebound higher with gains to the resistance level of 1807 dollars per ounce, the highest for the price of gold in more than a month. The price of gold XAU/USD is stable around the level of 1786 dollars an ounce at the time of writing the analysis.

Stock Market Analysis

Stock markets extended their rally Thursday after weaker-than-expected US inflation data fueled speculation that the Federal Reserve may switch to a slower pace of interest rate hikes. Accordingly, the European Stoxx 600 Index advanced for a second day, after rising to a two-month high after the CPI report, with technology and construction stocks outperforming. US futures rose after the S&P 500 reached a three-month high and the Nasdaq 100 pulled back 20% above its June low.

Technology stocks fueled a 1% rally in the Asian stock index. China’s bourses advanced even as investors digested its central bank’s warning about inflation threats and vowed to avoid massive stimulus.

The price of the US dollar stabilized after the previous day’s decline, which was the largest since the beginning of the epidemic. Short-term Treasury yields were lowered as investors’ expectations of how aggressively the Federal Reserve would be able to tighten monetary policy. According to official figures, the headline inflation rate in the United States reached 8.5% in July, down from June’s reading of 9.1% which was the largest in four decades. Price pressures remain severe and Fed officials were quick to stress that more US interest rate hikes are on the way. They also indicated that investors should rethink expectations for cuts next year to support economic growth.

The question is whether the recovery in global stocks and other riskier investments from this year’s defeat can continue against this backdrop.

According to US Central Bank officials:

Minneapolis Fed President Neil Kashkari said he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and 4.4% by the end of 2023. Referring to market pricing of the Fed’s policy trajectory, Kashkari said it’s not realistic to conclude The Federal Reserve will start cutting US interest rates early next year when inflation is very likely to exceed the 2% target.

For his part, Charles Evans, his counterpart in Chicago, said that inflation remains “unacceptably high” and that “we will increase rates the rest of this year and into next.”

Swaps pointing to the September Fed meeting brought the US interest rate back by half a point again in exchange for a larger move. A major part of the Treasury yield curve remains deeply inverted, a pattern widely believed to indicate the risk of a recession.

XAU/USD Gold Price Forecast Today:

• The stability of the gold price will remain above the psychological resistance of 1800 dollars an ounce, supporting the bulls’ control over the direction of gold.
• It will support the price movement towards stronger ascending levels, and the next. If this occurs, it will be the resistance levels of 1818 and 1832 dollars, respectively. 
• The movement of the XAU/USD gold price below the support level of 1770 dollars an ounce will have an important impetus for the bears’ move, and in general, I still prefer buying gold from every descending level.

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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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Spot natural gas prices rose in the last trading at the intraday levels, to achieve new daily gains until the moment of writing this report, by 1.18%. It settled at the price of $8.010 per million British thermal units, after rising during yesterday’s trading by 2.39 %.

After a multi-day drop in natural gas production slumped on Tuesday leading to a quick recovery in natural gas futures, NYMEX gas futures for September settled up 24.4 cents a day at $7.833/MMBtu. October futures were up 24.7 cents at $7.825.

NGI’s Spot Gas National Avg spot prices also regained some of the previous days’ losses despite thunderstorms expected to cool temperatures across large swathes of the United States. It rose about 5.5 cents to reach $7,900.

The US Energy Information Administration (EIA) said in its latest monthly forecast that spot prices for natural gas at the Henry Hub are on track to average $7.54 per million British thermal units for the second half of 2022 before dropping to $5.10 in 2023 as production rises.

In its updated version of its short-term energy outlook published on Tuesday, the Energy Information Administration said prices on the national index averaged $7.28 in July. This is a sequential decline from average prices of $7.70 in June and $8.14 in May, due to the growing slack in the market after the extended outage at the Freeport LNG terminal, the researchers said.

Natural Gas Technical Outlook

Natural gas finds some support due to the arrival of the relative strength indicators to very oversold areas, in an exaggerated manner compared to the price movement. This suggests the beginning of a positive divergence in it, in light of the continuation of positive support due to its trading above its simple moving average for the previous 50 days. The price is under the control of the main bullish trend over the medium and short term along with a minor slope line.

Therefore, our expectations indicate an increase in natural gas during its upcoming trading, especially in the event of its stability returning above the level of 8.054, to target the pivotal resistance level 9.600 after that.

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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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