Risk management is advised, with your position sizing being crucial and everything at this point in time.

• The West Texas Intermediate Crude Oil market initially tried to rally Wednesday but then plunged quite rapidly.
• As demand for crude oil continues to drop, this is going to be a running narrative in this market.
• The $90 level underneath will be crucial to pay attention to because it could open up the next wave of selling.

Breaking Below $90

Anything below the $90 level probably allows the market to drop down to the $80 level given enough time. Yes, we are below the 200-day EMA now as well and are threatening to break through a major consolidation area. While we could bounce from here, the reality is that the market has been somewhat relentless in its selling pressure, and it’s probably worth noting that even though OPEC has decided not to increase production, prices continue to fall anyway. This should tell you exactly what traders think about the economic outlook going forward.

That being said, if we were to recapture the $100 level, we would have to pay close attention to this market, because it might be ready to go much higher. At that point, we would probably retake $110 via the 50-day EMA. I’m not necessarily calling for that to happen, I’m just suggesting that it could be the outcome. Market participants continue to see plenty of reasons for negativity, and I think that’s probably the one main takeaway from here is that the market simply cannot pick up its feet. Because of this, I think that you will continue to face short-term rallies to show signs of exhaustion.

The Federal Reserve is tightening its monetary policy and is going to continue to do so. This is negative for risk appetite, which in turn is negative for all kinds of things, oil included. The main thinking right now is that an economic slowdown is going to drive down demand, and there is very little in the way to change that opinion. With this, I think that we will break down sooner rather than later, especially with the markets being as volatile as they have been, not just here, but everywhere else. Risk management is advised, with your position sizing being crucial and everything at this point in time. I would not get cute here and try to pick the bottom, as it looks like we haven’t made it yet.

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I think you have a lot of noise ahead of you, so you are going to need to be very cautious with your position sizing.

• The US dollar fell again against the Japanese yen on Monday as we continue to see a lot of problems out there.
• Ultimately, this is a market that I think given enough time we will have to find some type of stability, or we will break down rather drastically.
• The market is likely to continue being noisy in general, as we have a lot of different things going on at the same time.

Expect Buyers

The US dollar has dropped down to the ¥132 level, an area that is the beginning of a significant area of “market memory” that we will be paying attention to from both sides. Ultimately, this is a market that is paying close attention to the Bank of Japan, and what it is doing with its interest rates. Furthermore, interest rates in the United States have been falling, so at the same time, it looks as if the Bank of Japan will have to do a lot less quantitative easing, at least in this environment. This is part of why the Japanese yen has strengthened. That being said, the market was also overbought, so a little bit of a pullback does make quite a bit of sense. With this being the case, I think you are more likely than not going to see buyers jumping in sooner or later, and we are at the first major support region.

If we do break down from here, the next major support level is closer to the ¥127.50 level. That is an area where we have seen a lot of buying pressure previously, so I think it makes quite a bit of sense that “market memory” comes into play. Breaking down below that level could open up a significant selloff, sending this market much lower. At that point in time, I would assume that the uptrend is over. On the other hand, if we turn around and bounce at one of these levels, it’s very possible that we could continue to go much higher. Either way, I think you have a lot of noise ahead of you, so you are going to need to be very cautious with your position sizing. We do not have a set up to start buying quite yet, so I am essentially sitting on my hands at the moment.

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This is a market that I think continues to be very noisy, but we certainly have seen a major “shot across the bow” for the overall uptrend.

At this point, any type of significant momentum has been taken out of the market, and if we were to recover, it would take quite some time.

Pay Attention to Previous Uptrend Line

The previous uptrend line sits just above, and I think you need to pay close attention to it, as there should be a certain amount of “market memory” in the commodity, and I think that we could see sellers in that general vicinity. This is just below the $105 level, which is an area that continues to see a lot of interest based on the previous action, so if we do rally from here, I think the likelihood is that we could be short in that area.

If we break down below the $95 level, then it suggests that we could go to the $90 level underneath. The $95 level also suggests support due to the fact that the 200-day EMA sits right there. If we break down below there, then I think a lot of CTA traders will be forced to get short of this market, as it will have entered a negative trend. At that point, we would go much lower.

That being said, the market is likely to see a lot of concerns when it comes to the idea of a recession, but it should be noted that the market turning around the way it had late in the day on Wednesday is a very strong sign. However, that does not mean that we are done selling off. It is a huge argument between the idea of a recession crushing demand and the fact that we have not drilled much for the last couple of years, and we have to worry about supply. This is a market that I think continues to be very noisy, but we certainly have seen a major “shot across the bow” for the overall uptrend.

I’m looking for signs of exhaustion that tell me it’s time to start picking up “cheap US dollars” again.

The Australian dollar had a very tough session on Friday, breaking below the 0.68 level before finally recovering during the New York session. The Aussie dollar is highly levered to commodities, so this should not be a huge surprise as commodity markets have been taking a beating.

Commodities will continue to struggle as long as there are concerns about global growth, which is on the forefront of most traders’ minds. When trading the Australian dollar you should have an idea of what the gold market is doing, right along with aluminum, iron, and other hard minerals. Furthermore, you need to have an idea what’s going on in China as they are Australia’s biggest trading partner by far. With the Chinese seemingly hell-bent on locking themselves down at the first sign of a sneeze, it’s difficult to get a real read on the Chinese economy.

The Chinese have started to stimulate their economy, by whether or not that leads to any real change remains to be seen as major centers such as Shanghai continue to get locked down on occasion. This has a major influence on the Australian economy, as exports will get hammered in that situation. Furthermore, on the other side of this equation is the Federal Reserve and its monetary policy in the United States. It appears that the US is going to continue to tighten quite aggressively, and if that’s going to be the case I suspect that the Aussie, and most other currencies for that matter, are going to continue to have problems with the greenback.

The 0.69 level in the Australian dollar has been somewhat important recently, as will be 0.70 level be if we get to that area. I like fading rallies in this pair, and have no interest in buying the Australian dollar until it breaks about the 0.7250 level, something that would take a Herculean effort. Because of this, I’m looking for signs of exhaustion that tell me it’s time to start picking up “cheap US dollars” again. The size of the candlestick on Friday does tell us that there is a certain amount of conviction to the selling pressure, and I suspect that the only thing that saved the Aussie from falling apart quite drastically would have been the fact that the weekend was coming. Monday is Independence Day in the United States so liquidity could come into play as well.

The British pound has fallen quite hard for a while, so do not be surprised to see a day or two of gains, followed by more of an unwind.

The British pound had a rather rough day on Friday, falling all the way down to the 1.20 level before bouncing 100 pips during the New York session. This ended up forming a massive hammer, suggesting that we have a bit of a fight on our hands. It’s not a huge surprise, as a lot of people who may have wanted to short this market took profit heading into the holiday weekend in America.

That being said, I do think that the 1.24 level is going to be difficult to break above. While the British pound is not necessarily the worst currency right now, the reality is that the Federal Reserve is much more aggressive than other central banks around the world. With that in mind, I think this is a market that will continue to be noisy, but eventually you should see a nice selling opportunity on higher moves. At the first sign of exhaustion, I would not hesitate to short this market, but I also recognize that you don’t want to get too aggressive with your position size.

Breaking down below the 1.20 level does suggest that we would see much more momentum to the downside, perhaps opening up a move down to the 1.18 level. After that, the British pound more likely than not starts to trade near the $1.15 level. This does make a certain amount of sense, especially if we go into a massive recession worldwide, because the US dollar will be the currency everybody wants to own. Beyond that, traders will start to look at the bond market and is a place to be, as they have to worry about liquidity.

It certainly looks as if the British pound will fare better against most currencies when it comes to relation to the US dollar, but that does not necessarily mean that it’s going to go higher. It just simply means that it will be “less bad.” Because of this, I’m looking for opportunities to sell this pair at the first sign of significant exhaustion, but truthfully I would feel much better about shorting a commodity currency against the greenback, such as the Australian dollar or New Zealand dollar. The British pound has fallen quite hard for a while, so do not be surprised to see a day or two of gains, followed by more of an unwind.

Our expectations indicate a further decline for the index during its upcoming trading.

The Dow Jones Industrial Average slipped during its recent trading at the intraday levels, to break a series of gains that lasted for three sessions, to incur losses in its last sessions by -3.57%. It lost about -1,164.52 to settle at the end of trading at the level of 31,490.08, after rising in trading on Tuesday by 1.34%.

All 30 components of the index declined, with Walgreens Boots Alliance Inc., leading the stocks by percentage. by -8.48%, followed by Coca-Cola Co. by -6.96%, followed by Walmart Inc. Which recorded a loss of -6.79%.

The index recorded its worst day since June of 2020, amid persistent fears of stagflation and rising costs that undermine corporate profits, especially retail companies.

Data released on Wednesday showed housing starts in the US fell 0.2% to an annual pace of 1.72 million last month, indicating that higher mortgage rates, record home prices and the rising cost of building materials are starting to emerge. Economists had expected housing starts to come in at a rate of 1.75 million after taking into account typical seasonal fluctuations in demand. Meanwhile, the number of building permits fell 3.2% to 1.82 million.

Wednesday’s weakness came as investors worried that they shrugged off deeply disappointing results from Walmart Inc. WMT the day before, as Target Corp. TGT also said that it saw its profits affected by the rise in labor and fuel costs which led to losses in the retail sector.

Meanwhile, US Treasury Secretary Janet Yellen warned on Wednesday of the fallout from the Russian war in Ukraine that could lead to stagflation for the global economy, as rising food and energy prices lower production and spending around the world, while speaking ahead of ministerial meetings. Finance of the Group of Seven in Germany.

Technically, the index has surrendered to negative pressures on it, as it moves within the range of a bearish corrective price channel that limits its previous trading in the short term, as shown in the attached chart for a (daily) period, with the negative pressure continuing for its trading below the simple moving average for the previous 50 days, despite the trend Positive signals with RSI indicators.

Therefore, our expectations indicate a further decline for the index during its upcoming trading, especially throughout its stability below the 32,000 level, to target the support level 31,490.

The sharp pessimistic view on the part of the Bank of England, the fears of the impact of the Russian gas cut on Britain, and an expected path for a strong tightening of the US Federal Reserve’s policy, increased the selling of the GBP/USD currency pair to the 1.2155 support level. This is the lowest in two years and closed last week’s exciting trading stable around the level of 1.2258, amid strong control of the bears continuing.

The Pound benefited from the Euro sell-off and regained its recent losses caused by the reduction in interest rate hike expectations from the Bank of England. The Bank of England rate hike expectations have been dampened following the May monetary policy update as it raised near-term inflation expectations but lowered growth and long-term inflation expectations. We reported at the time that the BoE could be the first major central bank to explain the difficult reality facing advanced economies where growth is low, and inflation is rising and that what happened to the British pound could happen to the future of other currencies very soon.

Commenting on the factors influencing the currency pair, says Ulrich Lochtmann, FX and Commodity Research Analyst at Commerzbank, “The Bank of England recently forecast a prolonged period of stagflation in Britain. So many thought that British central bankers were pessimistic as a result. I think the recent price action shows that the BoE’s view will soon become the view of the majority among market participants, and not just in relation to the UK! .

Essentially, investors can also recognize that the UK is not necessarily in a materially worse position than the Eurozone in terms of inflation and growth risks. Indeed, while the Bank of England seems certain to offer more interest rate hikes in the market, the ECB sees an opportunity to normalize rates. The UK’s gas dynamics also appear to be in a stronger position than the Eurozone due to the UK’s ability to process LNG off ships and turn it into gas, before sending it via a pipeline to Europe.

We note reports that UK gas prices fell the next day earlier in the week amid a glut of gas from LNG sources waiting to be exported to Europe.

“Natural gas prices have jumped as a result, and while prices have jumped in the UK as well, prices have been lower in the UK lately,” says MUFG Halpenny. Since the beginning of April, prices in Europe have fallen by 10% but during the same period, prices in the UK have fallen by 40%.”

The EUR/USD parity could drive the GBP up even more. Analysts warn that the euro could weaken further if Russia puts more pressure on European gas supplies, an outcome increasingly likely given the abject failure of Russian forces to make progress in eastern Ukraine. Rabobank tells clients that they now expect a strong chance of a recession in the Eurozone at the end of this year.

According to the technical analysis of the pair: The general trend of the GBP/USD currency pair is still bearish, and there will be no change in the trend without a change in tone and the Bank of England’s view towards some optimism. Both the Federal Reserve and the Bank of England are in one path towards more rate hikes during the year 2022. On the daily chart, the pair’s recent losses have moved the technical indicators towards oversold levels. With continued weakness factors, forex investors may not find an opportunity to think of buying now and breaking the resistance 1.2850 is important to break the current sharp bearish channel.

The sterling-dollar pair may test the psychological support 1.2000 as soon as the 1.2120 support is breached. Today’s sterling will be affected by the reaction from hearing the Bank of England report.

The market will more than likely continue to be very noisy, but I still favor the downside and would be looking for signs of exhaustion on short-term charts to start shorting.

The New Zealand dollar initially tried to rally on Wednesday but gave back gains near the 0.69 level to plunge all the way down to the 0.6750 level at one point. We have since bounced from there a bit, but it certainly took a very bearish turn after initially trying to rally. The 200-day EMA has acted as a brick wall for a couple of days in a row now, and now it looks like we are threatening to break down below the 0.6750 level. If we do, then I think it will open up a move down to the 0.66 handle, possibly even the 0.65 level.

Keep in mind that the New Zealand dollar is highly levered to commodities, which have been getting a bit stretched at this point and have been pulling back after a very big move. That being said, the market has to price in the idea of a global slowdown, some places like New Zealand will certainly feel the pinch as they are major exporters. As the rest of the world’s economy is slowing down, exports coming out of New Zealand will as well.

Another thing to pay close attention to is the fact that there seems to be a lot of “risk-off” type of trading going on out there, which means that the US dollar will continue to attract a lot of attention. As long as that is the case, then I think the New Zealand dollar is going to struggle overall. It is worth noting also that the other risk appetite-based markets have been struggling, with the exception of the yen-related pairs but that has more to do with Japanese rate controls than anything else.

The market will more than likely continue to be very noisy, but I still favor the downside and would be looking for signs of exhaustion on short-term charts to start shorting. The New Zealand dollar does tend to move rather rapidly at times, so please keep that in mind as you are trading it. The market needs to break above the 0.69 level for me to even start to think about the upside, and even then it is probably better to wait until we get a break above the 0.70 level, as it offered so much resistance previously.

In general, this is a market that will continue to be noisy, so I think that you have to look at rallies as a potential pick of “cheap US dollars.”

The euro plunged on Friday to show signs of weakness yet again but did recover a bit towards the end of the day. This makes a certain amount of sense as traders will have booked profits heading into the weekend. There is so much in the way of concern out there that could come into the picture. After all, the euro has to deal with all magnitude of major issues.

The first problem of course is the war in Ukraine, which is right next door. By having an open conflict on the borders, there is always going to be a certain amount of concern about shooting crossing one of the borders. That is less of an issue now, but at this point is likely that it will still add a little bit of concern.

It is also worth noting that the interest rate differential continues to favor the United States, and that has a major influence on what happens here. As long as the interest rate differential continues to favor the US dollar, it will continue to pressure this market. That being said, the market did recover a bit and it ended up forming a bit of a hammer. If we can break above the top of the hammer, that could send this market higher, perhaps reaching the top of the two inverted hammers from a previous couple of sessions. Breaking above that level then allows more of a recovery, something that I think still would invite a lot of selling pressure above.

If we do break down below the 1.08 level, then it is likely that the market could go as low as the 1.06 level, but it will take some time to get down there. After all, there is a lot of noise underneath this area so I would expect it to be very choppy. In general, this is a market that will continue to be noisy, so I think that you have to look at rallies as a potential pick of “cheap US dollars.” On the upside, the 50-day EMA sits at the 1.11 handle, and I believe that would be a huge “ceiling in the market.” Ultimately, it is not until we break above the 1.12 level that the trend technically changes, and then it could change the way this market behaves.