I will be waiting on the sidelines for the next 24 hours until I put any money to work on Monday as it could be a much clearer situation by then.

• The NASDAQ 100 Index has gone back and forth during trading on Thursday
• We continue to see the market focus on inflation and whether or not the Federal Reserve is going to be involved.
• The market is likely to get a bit of resolution after the Non-Farm Payroll number on Friday, as traders are trying to figure out whether or not the Federal Reserve is serious about tightening monetary policy.

It’s amazing how many Federal Reserve members have come out during the past week and discussed that the Federal Reserve is serious about tightening rates and fighting inflation, so you should keep in mind that once the market “gets it”, it could be a very vicious turnaround. However, if the inflationary headwinds start to abate, that could cause another melt-up. When you look at the fundamental information out there, there’s no real reason for this to be happening other than hope

If the market were to turn around and break down below the 13,000 level, that gets in this market much lower, but I think the only thing you can count on is a lot of volatility and noise. The 50 Day EMA sits just below the 12,250 level and is curling higher. That’s an area where people should start to pay close attention to for support, and if we were to break down below that level, it’s likely that this market goes much lower.

I think the only thing you can count on here is going to be a lot of noise, therefore it’s likely that we would see a lot of back-and-forth trading, therefore you need to be very cautious. Nonetheless, it will be interesting to see how we close on Friday because it could give you an idea as to how much faith people have in the market because holding on to a position for the weekend speaks volumes. If the market cannot do so, then it shows you that they have no real belief in this rally, and we probably have further to go to the downside. Either way, I will be waiting on the sidelines for the next 24 hours until I put any money to work on Monday as it could be a much clearer situation by then. However, the proof will be in the price action.

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The pair will likely resume the bearish trend as sellers target the important support at 0.6850.

Bearish View

• Set a sell-stop at 0.6920 and a take-profit at 0.6850.
• Add a stop-loss at 0.7020.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 0.6970 and a take-profit at 0.7060.
• Add a stop-loss at 0.6850.

The AUD/USD price remains significantly below its highest this week as investors reflected on the latest Reserve Bank of Australia (RBA) decision. The pair dropped to 0.6945, which was about 1.40% above the lowest level this week.

US Jobs Data Ahead

The AUD/USD pair retreated after the RBA delivered its August interest rate decision. The bank decided to hike interest rates by 0.50%, meaning that it has increased rates four times this year. This is the most hawkish that the bank has been in decades.

The pair declined as investors worried about the pace of future interest rates since there are signs that inflation is peaking. For example, the price of crude oil has dropped from a year-to-date high of over $135 to less than $100.

Some analysts believe that oil prices will continue falling as OPEC+ hikes production. This is notable since oil is the biggest part of inflation in Australia and other countries. Moreso, the RBA warned that the country’s economy will continue slowing down in the coming months. The RBA will publish its minutes on Friday.

The next key catalyst for the AUD/USD price will be the upcoming US jobs data and statements by Fed officials. This week, officials like Charles Evans of Chicago and Lorretta Meister said that the Fed would continue hiking interest rates even as strains to the American economy remain.

For example, there are signs that the housing sector is slowing after data showed that new and existing home prices dropped sharply in June.

The US will publish the official jobs data on Friday. Economists expect these numbers to show that the country’s economy added fewer jobs in July than in the previous month while the unemployment rate remained unchanged at 3.7%.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair made a strong bearish breakout on Tuesday after the latest RBA decision. The pair managed to move below the lower line of the ascending channel. It also moved slightly below the 25-day and 50-day moving average. The Relative Strength Index (RSI) has moved to the neutral point.

Therefore, the pair will likely resume the bearish trend as sellers target the important support at 0.6850. This is both an important psychological level as well as the lowest point on June 14th.

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I anticipate that we will have another move lower just waiting to happen in this messy and very negative environment.

The S&P 500 Index itself was closed Monday, but the futures markets were open for limited off-hour trading. That being said, the futures markets gave us a little in the way of direction but when you look at the S&P 500 index itself, you can start to see that the market is trying to build a base for the upcoming Non-Farm Payroll announcement on Friday. In this scenario, the market may try to rally and reach toward the 50-day EMA.

Do not be surprised at all if that happens, and quite frankly I think that opens up a nice selling opportunity. The 50-day EMA sits right around the psychologically and structurally important 4000 level, an area that will attract a lot of attention. Even if we were to break above there, I see even more resistance at the 4200 level, where we had sold off quite drastically before. In this scenario, it’s easy to simply sit on the sidelines and wait for signs of exhaustion to jump all over.

The alternate scenario is that we will turn around and break down below the 3700 level, which opens up an attack on the 3600 level, followed by 3500 level. In that scenario, we would simply be continuing the overall negativity that we have seen in the market for some time, something that makes a lot of sense. However, a lot of participants will probably be waiting to get the Friday announcement out of the way before putting more money in the market, mainly due to the fact that the Federal Reserve now has to start paying close attention to employment figures.

Inflation still runs hot, and the Fed is expected to raise interest rates by at least 100 basis points over the next couple of meetings, and furthermore, companies around the S&P 500 are going to have to start writing down estimates, as the economy slows. If that’s going to continue to be the case, there are plenty of headwinds for this market, and I do not think that we can turn around enough to break above that 4200 level. Given enough time, I anticipate that we will have another move lower just waiting to happen in this messy and very negative environment.

EUR/USD will likely keep rising ahead of the upcoming US NFP data. 

Bullish view

• Buy the EUR/USD pair and set a take-profit at 1.1235.
• Add a stop-loss at 1.1100.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.1150 and a take-profit at 1.1100.
• Add a stop-loss at 1.1230.

The EUR/USD made a brief bullish breakout even as Europe faced one of its biggest energy challenges ever. The pair rose to a high of 1.1170, which was the highest point since March 1.

Europe Energy Crisis

Many EU member states like Germany rely on Russia for most of their energy. As a result, the bloc’s economy has been severely hit by the ongoing crisis as the cost of both oil and gas has risen.

The situation has been worsened by the recent announcement by Russia that it will only accept energy sales using the ruble. In a meeting this week, EU members rejected that measure, meaning that the region could be cut off from Russian energy in the coming days.

EU member states have already started preparing for the worst-case scenario. For example, Germany and Austria announced new measures that could lead to gas rationing. Germany established a committee that will analyze supply and then make necessary adjustments.

Austria, which imports 80% of its total gas from Russia, said that it would implement the first stage of its three-stage emergency contingency plan. Therefore, analysts expect that gas prices will keep rising in the coming weeks.

In a statement on Wednesday, Christine Lagarde said that she sees living costs spiral as the Ukraine war continues. She also insisted that inflation will stop rising. Still, most analysts believe that the chances for stagflation are still limited.

The next major  EUR/USD catalyst will be the upcoming US non-farm payrolls data that comes on Friday. Economists expect these numbers to reveal that the economy added more than 400k jobs in March as the economy continued its recovery process. They also see the unemployment rate dropping to 3.7%. These numbers will be unlikely to change the sentiment by the Federal Reserve.

EUR/USD Forecast

The EUR/USD pair has been in a strong bullish trend in the past few days. On the 4H chart, the pair is trading at the upper side of the ascending channel shown in blue. It has also moved above the 50% Fibonacci retracement and the 50-period moving average, signaling that bulls are in control. The MACD has moved slightly above the neutral line.

Therefore, the pair will likely keep rising ahead of the upcoming US NFP data. The next key target will be at the 61.8% Fibonacci retracement level at 1.1232.