Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver.

The DAX initially gapped lower during the Monday open but turned around miraculously to wipe all of that out and end of the day in the green. In fact, it ended positive at about 4/10 of a percent, which is a rather unremarkable figure, and you take a look at the chart and see how much gain it took to get to that point.

At this point, I still think that the DAX is probably going to find some pretty significant selling pressure above, but it looks as if there might’ve been a little bit of value hunting during the day. Signs of exhaustion after rallying will be an excellent opportunity to get short again from what I can see, as the EU is in serious trouble and the German economy is not going to be spared. After all, modern economies demand a lot of energy, not necessarily something that we are going to see in Europe.

ECB’s Policy Favors Bears

• The ECB claims that it’s going to be raising interest rates, which is interesting considering that the EU economy is so fragile now.
•  Inflation is out of control, so they may not have any other option but to try to tighten in this environment. Because of this, it’s difficult to imagine a scenario where the market can simply take off.
• The DAX should open a nice selling opportunity above, perhaps near the 13,200 level.

The candlestick on Friday was rather brutal, and that does suggest that there will be a bit of follow-through. Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver. If inflation continues to be an issue, stocks need to come down, not only in Germany but worldwide in general. The market will almost certainly try to get back down to the 12,500 level, where we had bounced from previously. If we break it down below there, then we could see a major continuation of negativity. All things being equal, I think if you are patient enough to look for selling opportunities, you should do quite well in this environment. If we wipe out the Friday candlestick and take out the top, then I might be convinced we can go further to the upside.

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Short-term breakouts might lead to longer-term selloffs.

• The West Texas Intermediate Crude Oil market has fallen rather hard during the trading session on Monday but then turned around to show signs of life.
• The market ended up forming a bit of a hammer, and the hammer sits just above the $90 level.
• The downtrend line just above is part of a “falling wedge”, and therefore breaking above there could kick off a move to the upside.

If we were to break out to the upside, it’s likely that we will test the 200 Day EMA, which is the blue line on the chart, which is also being tested by the 50 Day EMA as we are slowly lower. At this point, I think that might be your first target, but I also recognize that scenario that could cause quite a bit of trouble. Signs of exhaustion in that area could be jumped on, but if we break above it, then one would have to assume that the market is going to go looking to the $100 level.

Demand causes concern

If we break down below the bottom of the hammer from the candlestick on Monday, then it should open up quite a bit of fresh selling, perhaps sending this market down to the $80 level after we break through the $85 level. Keep in mind that a lot of people are worried about the potential slow down globally, which of course would have a lot of negativity attached to the oil market as demand should drop. More likely than not, that will probably be an ongoing theme in this market, as signs of exhaustion will almost certainly be jumped on. If we do get those signs of exhaustion, it’s likely that the market then will jump on it and start shorting again.

If we were to break above the $100 level, then it’s likely that the market could change its overall attitude, perhaps opening up a move to the $110 level. I don’t expect to see that, but it is something worth paying close attention to, and therefore it’s something to keep in the back of your mind. All things being equal, this is a market that I think will continue to see more noise than anything else, but clearly, there is a serious concern out there when it comes to the overall demand. Short-term breakouts might lead to longer-term selloffs.

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The Friday close could tell us a lot about how people feel about holding on to risk assets.

• The S&P 500 index rallied a bit during the trading session on Thursday but gave back gains rather quickly.
• This is a market that looks like it is running into a bit of overextension, and the fact that we did up forming a bit of a shooting star should not be a huge surprise considering that the market shot straight up in the air after the “surprise” CPI number.
• Now that the children are out of the way, cooler heads have prevailed, which is quite often the case during these announcements.

Ultimately, the CPI numbers coming out the way they did were cooler than anticipated, but the reality is that the inflation numbers in the United States are far too high to think that the Federal Reserve is going to slow down. In fact, they have been telling anybody that will listen to them that they are in fact going to continue to see reasons to hike rates. Because of this, it’s very unlikely that the stock market can simply go straight up in the air from here. Furthermore, we are heading toward the weekend, so the Friday close could tell us a lot about how people feel about holding on to risk assets.

With that being said, would not surprise me at all to see a little bit of a pullback at this point, perhaps reaching toward the bottom of the candle from the Thursday session. If we blow through that, then it’s likely that the market goes much lower, perhaps reaching down to the 4000 level. I do not think this market simply melts down, but the reality is that the economic situation has not changed whatsoever, so I’m not overly concerned about trying to get long at this point.

If we do break to the upside, then we would need to deal with the 200 Day EMA, which has a lot of psychology attached to it. We also have the 4300 level, which is a major resistance barrier, so that would take quite a bit of effort to get through. If we do that, then I think we have a longer-term “buy-and-hold” type of situation ahead of us. That seems to be very unlikely at this point though, simply due to the fact that we have so many crosscurrents out there.

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In general, I think this is a market that will continue to be more of a range-bound type of situation.

• The AUD/USD currency pair fell a bit Wednesday to break down below the lows of the previous candle, showing that perhaps there is still plenty of downward pressure.
• However, we have turned around in the middle of the day and have seen the market try to recover completely.
• The 50-day EMA sits just above, and of course, causes a certain amount of noise.

Keep an Eye on Commodity Markets and 10-Year Yield

The candlestick for the day is forming a bit of a hammer, and that is a bullish sign, but we are simply testing the bottom of the recent consolidation area. The market will almost certainly continue to come back into the picture and look at this through the prism of risk appetite and consolidation at the same time. After all, the Australian dollar is considered to be highly levered to commodity markets, which are highly levered to world growth. If the economy starts to enter a very rough patch, it does make a certain amount of sense that the Australian dollar could suffer as a result. Alternatively, if we start to see growth return and perhaps even stimulus, that will help the Aussie as well.

Looking at the 10-year yield helps because it tells you where the US dollar may or may not end up, which is something worth paying close attention to. Another thing worth keeping in the back of your head is the fact that the jobs report comes out on Friday, so it’s more likely than not we go sideways over the next couple of sessions until we get that vital piece of information. The fact that we could not take off in one direction or the other should not be a huge surprise at this point. That being said, I anticipate that we will grind back and forth and essentially chop it up in this tight range. I do favor the downside overall, but I also recognize that we need a catalyst to get moving.

In general, I think this is a market that will continue to be more of a range-bound type of situation, so if you are going to trade it, you need to approach it from the idea of a range-bound short-term setup until we get a break above the 0.750 level or breakdown below the lows of the session on Wednesday.

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I believe we will continue to see more of a “fade the rally” type situation in this pair.

The British pound initially tried to rally on Monday, but could not hang on to the gains. Because of this, it looks as if the British pound is ready to go lower, which does make sense considering just how hawkish the Federal Reserve is as of late. The Fed has already promised to raise interest rates another 100 basis points, and some are even thinking it may be closer to 150 basis points.

On the other hand, the Bank of England, although sounding more hawkish, is nowhere near raising rates to that effect. Because of this, the interest rate differential alone will continue to drive the US dollar higher. Furthermore, there are concerns about recession around the world, and that typically causes a shortage in US dollars. There are trillions of dollars worth of debt around the world right now that need to be repaid in greenbacks, so the demand is extraordinary.

When I look at this chart, the most interesting trait for me will be to fade rallies as they occur and show signs of hesitation. Monday was another example of such potential trading, albeit on a short timeframe and during a holiday schedule. Speaking of the holiday, it was Independence Day in the United States, and with none of the banks in New York putting a lot of money to work, the US dollar still managed to fight off an attempt to sell it off by the Europeans. This says quite a bit about the future direction of this market, and I believe we will continue to see more of a “fade the rally” type situation in this pair.

We would have to break above the 50-day EMA at the 1.24 level to begin to think about going higher, and even then I would not be convinced until we broke above the 1.26 level. I suspect that it is much more likely that we go to the 1.18 level before all of that happens, as it looks like we are going to do everything we can to break this market back down. The 1.20 level of course has attracted a lot of psychological support, but whether or not it holds is a completely different argument altogether. I do think that eventually it gets broken through and we drop further.

We would have to have a major “risk-on rally” globally to make the CAC start to take off to the outside in any type of sustainability.

The French CAC Index initially tried to rally to reach the €6100 level. The €6100 level has been a bit of resistance over the last week or so, so it’s not a huge surprise to see that we pulled back from it. At this point, the market looks as if we are going to test the $6000 level, which is a large, round, psychologically significant figure. The €6000 level is an area that a lot of people will be paying close attention to, but quite frankly there is an even bigger support level underneath.

The €5800 level underneath is a massive area of support where we have formed a little bit of a double bottom recently, and if we can break down below there, the CAC will unwind quite drastically. If we were to break down below that level, then the market could really start to fall apart at that point. France is going to lead the way lower for the major indices from what I can see, especially considering that a lot of people are going to be cutting back from luxury goods, which is a huge driver of the index itself.

If we were to turn around and break above the €6100 level, then it’s possible that the market could look to the 50-day EMA for the next resistance area, near the €6300 level. The €6300 level is an area that could be of interest due to that indicator, and as result, I think technical traders may pay attention to it. The 50-day EMA indicator and the 200-day EMA indicator are spread out rather far, suggesting that we do have plenty of moments and to the downside, and there will be plenty of sellers willing to jump in. At this point, I think that if the CAC rallies, you have to be looking towards signs of exhaustion as a reason to start jumping on the market again. As far as buying the CAC is concerned, it’s difficult to imagine doing so until we break above the 50-day EMA at the very least. The trend could change quite drastically if we break above the €6600 level, which is going to take a lot of momentum and effort. We would have to have a major “risk-on rally” globally to make the CAC start to take off to the outside in any type of sustainability.

Ultimately, I think we will break out and I don’t have any real interest in trying to short this pair anytime soon.

The Canadian dollar initially dropped Wednesday but saw a nice recovery late in the day. This lines up quite nicely with the oil markets, as they had initially sold off, but have also recovered quite a bit. Because of this, the market has jumped right back to its old correlation between crude oil and this market, so it does make sense that we would see the shape of the candlestick look the same in both markets.

At this point, there is no reason to think that this market will not continue to go higher, because the Bank of Japan continues to fight interest rates rising in that country, meaning they are essentially “printing Yen” along the way. They are by far the loosest central bank in the world, so the Japanese yen will continue to pay the price. Furthermore, if there is more demand for crude oil out there, that benefits Canada, and it’s also worth noting that Japan imports 100% of its crude oil.

The ¥102 level looks to be supported, especially now that the 50-day EMA is rapidly approaching that level. This is a nice uptrend, and there’s no reason to fight what’s going on here. Waiting for dips that you can pick up a little bit of value in makes the most sense. It is worth noting that the ¥107.15 level has caused a minor resistant barrier, but there’s nothing from a psychological or long-term standpoint that suggests that we cannot break above that level and continue to go higher. In fact, I fully expect that to be the case, especially after the price action during the trading session on Wednesday.

With oil recovering the way it did late in the day, it does make sense that we would see the CAD/JPY pair continue to show signs of life. That being the case, if we can get some type of significant rally in the stock markets, that may help this pair as well. It’s worth noting that it was a strong balance during the day, so everything lined up for a nice recovery after some early selling during the Asian session. Ultimately, I think we will break out and I don’t have any real interest in trying to short this pair anytime soon.

There’s no scenario in which I’m willing to buy this market, due to the fact that there is so much negativity out there, and risk appetite is through the floor.

Ethereum markets initially tried to rally on Tuesday but gave back gains near the $1200 level as we continue to see a lot of negativity in the crypto market. Ultimately, this is a situation that you need to pay close attention to, as the crypto markets in general are on the precipice of a significant selloff. Ultimately, the $1000 level is going to be crucial for Ethereum, so pay close attention to whether or not we can stay above there. If we can, that would be the first positive sign that we have seen in crypto in a while.

On a breakout to the upside, we could see an attempt to get to the 50-day EMA, which currently sits at roughly $1800. $1800 level is an area that has been important previously, as it had been supported. Now it should end up being resistance, but at this point, I think it’s a little ambitious to think that the market is going to make that move, but if we did, it should end up in a nice shorting opportunity. Quite frankly, the Ethereum market has been so noisy as of late and negative that I just don’t see how this thing changes.

If we break down below the lows of the last couple of days, then it’s possible that we could go down to the $800 level, perhaps even the $600 level. Fading rallies continue to be the best way forward, but if we do just simply roll over and fall apart, you cannot argue that as well. That being said, there’s no scenario in which I’m willing to buy this market, due to the fact that there is so much negativity out there, and risk appetite is through the floor. The market will continue to be difficult for buyers, and I think that we have a lot of concerns out there. When it comes to anything remotely close to being far out on the risk spectrum, crypto is way out there and you need to keep all of that in mind. The market has been in a downtrend for quite some time and should continue to be until the Federal Reserve changes its monetary policy, perhaps sometime late this summer, but the next two meetings are already promised to be rate hikes.

The price is more bullish above 0.7063.

My previous signal on 7^th June was not triggered, as there was no bearish price action when the resistance level which I identified at 0.7213 was first reached.

Today’s AUD/USD Signals

Risk 0.75%

Trades may only be taken prior to 5pm Tokyo time Tuesday.

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7038 or 0.7063.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 time frame immediately upon the next touch of 0.6995, 0.6976, or 0.6950.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote in my previous forecast on 7^th June that this pair was trading in a choppy, wide range, making trading unpredictable except when fading price extremes. This would point to a long trade from a bullish bounce at 0.7143 or a short trade from a bearish reversal at 0.7275. I recommended waiting for two consecutive higher hourly closes above the resistance level at 0.7213, and then enter a cautious long trade if you want to trade this currency pair today. This was not a good call as it led to a losing trade.

The technical picture and markets in general have moved quite dramatically since then, with risk-off sentiment coming to dominate after US CPI data last week showed a shock rise to an annualized rate of 0.75%. This sent the US Dollar higher and risk assets falling, and the AUD is a major risk asset, so the price here has come down heavily.

A few hours ago, we saw the price hit the big round number at 0.7000 and make a bullish bounce there. For how long this low will hold, is anyone’s guess – I suggest not to have any faith in it until the price gets established above at least 0.7038 or ideally 0.7063.

A short trade from a strong bearish reversal at 0.7063 is likely to be the best opportunity which might set up here today, as it is unlikely that we are going to see anything happen which really changes the risk-off sentiment currently dominating markets.

There is nothing of high importance scheduled today regarding either the AUD or the USD.

This is a market that is going to be very noisy, so you need to be cautious with your position size as I expect volatility is going to pick up.

The DAX fell initially on Wednesday but found enough buyers underneath to show signs of life again. By doing so, the market looks likely to continue to find value hunters, as the €14,400 level has offered significant support. The candlestick for the day is a bit of a hammer, so it does suggest that we could have more upward pressure, but the 200-day EMA will more likely than not offer a significant amount of resistance.

If we were to break down below the bottom of the candlestick for the trading session on Wednesday, that opens up the possibility of a move down to the 50-day EMA, which is currently sitting near the €14,100 level and curling higher. It had been previous dynamic resistance, so it should now be dynamic support. We are currently between the 50-day EMA and the 200-day EMA indicators, which is typically very noisy. It does make a certain amount of sense due to the fact that the entire economic system is currently all over the place. After all, we need to worry about whether or not inflation and global demand will continue to be difficult for risk appetite.

If we were to break down below the 50-day EMA, we will probably attempt to get down to the €14,000 level, which is a large, round, psychologically significant figure. If we were to break down below there, then it’s likely that the market could go down to the €13,300 level. The market certainly looks as if it is trying to break out and make a bigger move, but there are so many negative places above that I think even if we do rally, it’s going to be very difficult for this market to rally for a bigger move. In fact, the €15,000 level is an area that I think will attract a lot of attention due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen previous support, meaning that there should be a significant amount of “market memory” at that region. This is a market that is going to be very noisy, so you need to be cautious with your position size as I expect volatility is going to pick up.