Price likely to remain bearish below $1.1868.

My previous GBP/USD signal on 16^th August could have produced a slightly profitable short trade from the bearish rejection of the resistance level which I had identified at $1.2100 if the trade had been closed out at the end of the day’s London session.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be taken before 5pm London time Thursday.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1791 or $1.1695.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

Short Trade Ideas

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1791, $1.1864, or $1.1878.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

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.

GBP/USD Analysis

I wrote in my last forecast on 16^th August that the downwards price movement looked most likely to continue, as we saw a bearish technical situation with the price selling off within descending bearish wedge chart patterns. I thought that a bearish reversal from $1.2100 could be a good short trade opportunity.

This was partially correct – although the level at $1.2100 initially held it was broken later, but the price fell early the next day and is now trading considerably lower.

We saw the GBP/USD currency pair reach its lowest price since the coronavirus panic of March 2020 yesterday, not far above $1.1700, before the price rebounded strongly during the New York session later. However, the key resistance levels at $1.1864 and $1.1878 held, and the price was pushed back down. We also have a medium-term bearish trend line, which is shown within the price chart below, which is helping to suppress the price.

There is a long-term bearish trend, with good fundamental reasons for the strength of the US Dollar (a Fed that is talking about getting tighter with its monetary policy) and the weakness of the British Pound (inflation above 10% and the Bank of England forecasting a five-quarter recession).

I look to trade this pair short, and I see the area from $1.1878 down to the bearish trend line as a good zone in which to enter a short trade after a bearish reversal in price action. In fact, the price can now be contained within a bearish price channel which I have completed in the chart with the lower descending trend line.

If the price does not retrace to that zone but just falls, scalpers might try to be brave and capture a few long pips from a bullish bounce at $1.1791 or $1.1750 below that. The latter is not a key support level, but it does look like the price is taking note of it and reacting when it gets there.

There is nothing of high importance due today regarding either the GBP or the USD.

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Commodities are struggling overall, and it looks like the sellers have finally come for this one.

The West Texas Intermediate Crude Oil market fell hard on Tuesday as traders came back from holiday in America. The market sliced through the crucial $100 level, so at this point, I think we have a serious problem when it comes to the overall uptrend. The 200-day EMA sits just above the $95 level, and I think we need to pay close attention to that level as well.

It seems as if the crude oil market is finally joining the rest of the commodity markets, which have been breaking down. The noisy behavior of the market has finally given way to volatility, and I think it’s only a matter of time before we break down low there. If we do break below the $95 level, then it will kick off massive selling. The fact that the market lost almost 10% at one point during the day does not bode well for the future of this market, and I think it’s only a matter of time before we see further downward pressure, as it looks like the lack of supply is not enough to have people trying to buy this market in this environment.

If the US dollar continues to strengthen quite drastically, it’s likely that we will see the crude oil market fall. Ultimately, I think rallies are to be sold into until we break above the $110 level, which is also where the 50-day EMA sits. That’s where we started the day on Tuesday, which looks pretty far away. Ultimately, I think short-term rallies will continue to be sold into at the first signs of exhaustion, and I think that short-term charts are probably what you want to focus on. If we were to turn around and break above the 50-day EMA on a daily close, then it’s likely that this market could go to the $120 level. That would obviously be a massive bullish move, but I don’t see that happening in this type of environment. With other commodity markets such as copper, wheat, and natural gas falling apart, it’s not a huge surprise that we have seen more downward pressure over here. Commodities are struggling overall, and it looks like the sellers have finally come for this one.

The AUD rose on a minor risk-on rally.

My previous signal on 30^th June was not triggered, as none of the key support and resistance levels were reached that day.

Today’s AUD/USD Signals

Risk 0.75%

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

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of the descending trend line shown in the price chart below which currently sits at about 0.6898, or 0.6915.
• 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 H1 time frame immediately upon the next touch of 0.6848 or 0.6797.
• 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.
• 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.

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 30^th June that we had a consolidation pattern consolidation reinforced by a narrowing triangle formation which was holding the price, suggesting that the best opportunity which could set up here over the day was a long from another rejection of the level at 0.6848. This did not set up – the price held within the triangle until the Asian session, when it fell strongly enough to cleanly break through that support level.

The Australian Dollar is in focus right now for two reasons:

1. The minor risk rally seen over recent hours has pushed the price up close to the long-term descending trend line, which is shown within the price chart below.

2. The RBA is expected to shortly hike its interest rate by 0.50%. Any deviation from this will certainly cause a major price movement here in the AUD/USD currency pair.

It looks as if we may have an opportunity for a short trade from a bearish reversal at either the descending trend line or the horizontal resistance level at 0.6915. I would be happy to enter either trade. On the other hand, if the price rises after the RBA’s release and holds up for a few hours above the resistance at 0.6915, that would be a significant bullish breakout and suggest the beginning of a stronger bullish price movement.

You can trade my forecasts in a real or demo Forex brokerage account according to whether you want to strengthen your self-confidence before depositing real funds with a suitable Forex / CFD broker.

Concerning the AUD, there will be a release of the RBA’s Cash Rate and Rate Statement at 5:30am London time. There is nothing of importance scheduled today regarding the USD.

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.

Be cautious about jumping in with a huge position until you get reasonable confirmation for your trade.

The West Texas Intermediate Crude Oil market fell during most of the session on Wednesday but did see a bit of recovery late in the day. What’s interesting is that people are suddenly focusing on the lack of demand due to the recession, which is something that you would have thought had to cross their minds before. However, it does not look like it has, so we had a little bit of panic selling. It looks as if the crucial $100 level has held though, and that’s probably more important than the uptrend line.

This is going to come down to demand, and whether or not good signs of reopening in China are enough to overcome recessionary fear in the West. I think at this point it’s going to continue to be a bit of a battle, but it is worth noting that the commodities markets have seen sudden selling pressure and natural gas and copper as well, both markets that had previously been doing fairly well. There’s an old expression, something about shooting generals when things get bad. That might be what was seen here, so you will most certainly have to pay close attention to this market.

If we were to break down below the $100 level, that could change a lot of attitudes, perhaps even have people start to short this market. As things stand right now, I’m not necessarily comfortable shorting this market because we are still very much in an uptrend, and it is worth noting that there was a significant attempt to save the market today. If we can break above the $110 level, then I think the overall uptrend continues, perhaps strong enough to make a run toward $120 above.

You will have to keep an eye on inventory numbers, some of which come out on Thursday, employment numbers, GDP, consumer sentiment, and everything else in the world right now that seem to be throwing the markets around. If we are in fact going into recession, one would think that oil has only a limited amount of upside, but right now it looks as if nothing has changed, at least not enough to change the overall attitude of this market, so be cautious about jumping in with a huge position until you get reasonable confirmation for your trade.

At this point, it seems like the only thing that people want is the US dollar in this type of environment.

The gold markets pulled back a bit during the trading session on Thursday to drop to the previous uptrend line. The uptrend line has been crucial, so therefore it’s likely that we will continue to see buyers trying to pick this market up. After all, we had initially fallen during the trading session on Thursday, only to see a lot of momentum to the upside. The 200 Day EMA above will offer a bit of dynamic resistance, and it should be noisy, to say the least. After all, we have gone back and forth quite viciously over the last 48 hours, so it is worth paying attention to whether or not we are trying to form a bit of a “double bottom.”

The $1800 level looks to be crucial, and as long as we can say above there, it does make quite a bit of sense that we would see buyers willing to come in and pick this market, it looks to me as if we are ready to attempt to break to the upside, but I think you need to wait for pullbacks in order to pick up a little bit of value. Gold does tend to do well in times of concern, and I think it is possible that we could see buyers come into this market hand over fist. However, in the short term I would anticipate a lot of volatility, therefore I would not jump in with a huge position. In fact, I would build up a position slowly as it worked out, recognizing that the volatility is going to get worse, probably not better.

Ultimately, this is a market that if it can break above the $1880 level, it’s likely that we will continue to go to the $1900 level, and then the $2000 level after that. Having said that, we would need to see interest rates drop quite drastically or silk type of financial shock to get things moving in that direction. If we were to break down below the $1800 level, then we could see a lot of negativity in this market, pushing it down to the $1750 level, followed by the $1700 level. At this point, it seems like the only thing that people want is the US dollar in this type of environment.

The only thing I think you can count on at the moment is going to be a lot of noise, as we are reentering the area that had been so important previously. 

Gold markets bounced a bit on Wednesday as the Federal Reserve announcement has come and gone. With the Federal Reserve raising interest rates by 0.75%, it seems like the market was satiated for the time being. At this point, the market has been noisy for a while, so the fact that we ended up forming a major green candle does suggest that perhaps we are trying to put together a “double bottom.”

The uptrend line is something that people pay attention to as well, and of course, the $1800 level should be paid close attention to. At this point, it looks as if the gold market is going to continue to see a lot of noisy behavior, but at this point, I think short-term pullbacks will offer buying opportunities, but you need to pay close attention to inflationary expectations, and it is probably worth noting that we are going to have to pay close attention to the 200-day EMA at the $1855 level.

However, if we were to break down below the $1800 level, then it would be an opening to the downside, possibly breaking down to the $1700 level. That would be a major move in the US dollar just wait and happen, so I’m looking at this through the prism of the anti-US dollar and of course the interest rate situation. The only thing I think you can count on at the moment is going to be a lot of noise, as we are reentering the area that had been so important previously. Ultimately, this is a market that I think continues to see a lot of noisy behavior, so keeping a smaller position is a good way to keep yourself from being shaken out, as it would be very easy to have that happen. The 50-day EMA is starting to break down to the 200-day EMA, which in theory could open up the possibility of a move to form the “death cross”. Either way, I think you got a lot of back-and-forth at this point, and you should treat it as such. If we were to break above the $1880 level, then gold almost certainly will take off to the upside, perhaps reaching to the $1900 level, followed by the $2000 level longer-term.

The Euro has broken down during the trading session on Tuesday to break through a short-term uptrend line. You can make an argument that we have pierced the bottom of a rising wedge, but it’s also worth noting that the market did a lot of recovery later in the day. In other words, we are still spinning our wheels and trying to figure out where we go next.

With inflation numbers in America coming out on Friday, it could very well be a situation where we are going to kill time between now and then. I certainly know that the market has been choppy enough to make it feel like that. If we do rally from here, the 1.08 level is a significant amount of resistance, as it was previous support. We also have the 50 Day EMA just about, and that will more likely than not show quite a bit of noise as it typically does.

If we were to break down through the bottom of the candlestick, then we could go looking to reach the 1.06 level, possibly even down to the 1.04 level, which would be a fulfillment of the measured move of the rising wedge. Breaking below the 1.04 level opens up the possibility of a move down to the 1.02 level, followed by parity. A lot of pundits do believe that the Euro will eventually go to parity, but it’s obvious that we are fighting to see that happen.

Interest rates will drive everything, and at this point, some traders are starting to think that the European Central Bank will have to become a bit more aggressive with its monetary policy, due to inflation in the continent. However, the Europeans also have a growth problem, so it’s a much more complex situation than the very complex situation in the United States. In a situation where we will more likely than not continue to see a lot of concern, it also makes sense that the US dollar would be favored. We are in a downtrend, so I have to assume that the sellers will continue to come back into the picture. However, if we were to break above the 1.09 level, then we may make a move to reach the 200 Day EMA, which is at roughly 1.1140 at the moment.

Gold markets bounced a bit during the session on Tuesday to reach above the $1850 level. This is right in the middle of the recent consolidation area, and therefore it’s not a huge surprise to see this happen. Whether or not this was a reason to get involved is a completely different question, but I think at this point we are more likely than not going to see a lot of back and forth. In other words, we have nowhere to be and that makes quite a bit of sense considering that the markets are waiting on inflation numbers coming out of the United States on Friday. In other words, I think you have more of this ahead.

The 50 Day EMA above will more likely than not cause quite a bit of resistance, followed by the fact that it is sitting at the $1875 level, an area that has been important a couple of times anyway. Because of this, I think it’s probably only a matter of being patient enough to wait for some type of breakout. That might actually be next week, so gold is a market that I’m not that interested in. If we were to break above the $1880 level, then I think we can look into the $1900 level, followed by the $1920 level. After that, the market could go as high as $2000. The market going that high would take quite a bit of momentum though, so I’m not necessarily holding my breath for that.

If we were to turn around and break down below the lows of last week, then it’s possible that we could go down to the $1800 level. $1800 level is a large, round, psychologically significant figure, and of course, an area where we have seen action in the past. It’s also worth noting that the market will be approaching a two-year uptrend line in that general vicinity as well, so I think it’s probably only a matter of time before we find buyers on any type of breakdown. After all, there are a lot of concerns when it comes to safety other, and then it does help gold overall. But the US dollar can work against it at times as well, and I think we continue to see a lot of noisy behavior more than anything else.

It will be interesting to see if traders are willing to hang on to this market over the weekend and hold a bullish position.

The German index as a rally during the training session on Thursday to break above a major downtrend line. This downtrend line was at the top of the down-trending channel, so this course is something that’s worth paying attention to. That being said, we are still very much in a downtrend, so we need to be very cautious about trying to get overly bullish here. There are quite a few things to watch in the next couple of days, so I think this is going to be one of the more interesting stock markets that follow.

The €14,250 level was an area of resistance that we are now threatening, and if we can break above here it’s possible that we could get looking to the €14,500 level. After that, the market could then go to the €14,750 level, where the 200 Day EMA said. At this point, the market rallying would take quite a bit of effort, and I suspect that you are more likely than not going to have to pay attention to other indices around the world to get a feel as to whether or not the “risk-on rally” could continue.

Keep in mind that markets have been sold off rather drastically, but I would also make a counterargument that the most impulsive move as of late was to the upside as we bounced from the lows back in March. We could be seen an attempt to validate that move, so sooner or later you were going to have to go ahead and buy this market if we do continue to see this type of action. I suspect you will probably need to pay attention to the FTSE 100, CAC, and maybe even the MIB to get an idea as to where this particular index may go.

If we were to turn around and break down below the lows of the Wednesday session, then it’s likely that we pull back again, perhaps going to the €13,500 level. While I’m not quite ready to go long in this market, the reality is that we made quite a big move toward that possibility during the trading session on Thursday. It will be interesting to see how this week closes out, and whether or not traders are willing to hang on to this market over the weekend and hold a bullish position. That could be the final clue.