The pair will likely continue falling as sellers target the next key support at 1.1750.

Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.1750.
• Add a stop-loss at 1.1900.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.1900 and a take-profit at 1.2000.
• Add a stop-loss at 1.1800.

The GBP/USD price crashed to the lowest level since July as the US dollar rose across the board. It dropped to a low of 1.1830, which is much lower than this month’s high of 1.2288.

US dollar strength

The GBP/USD pair continued its downward trend as the US dollar staged a major rally. The greenback rose against most currencies, including the Swiss franc, euro, and Japanese yen. As a result, the dollar index, which tracks its performance against a basket of currencies, rose to the highest point in weeks.

The US dollar strength continued after Chinese data showed that the economy was weakening. Industrial production and retail sales growth was lower than estimated, pushing the PBoC to lower rates on key bonds.

The strength then accelerated after the Federal Reserve published minutes of its past monetary policy meeting. The minutes showed that the bank’s officials were increasingly concerned that inflation will become entrenched in the economy for a long time.

At the same time, the officials were worried about moving too fast and too soon on rate hikes. It has already hiked interest rates by 225 basis points this year and started implementing a quantitative tightening policy.

Federal Reserve speakers like Charles Evans, Lorretta Mester, and Neel Kashkari said that the bank will likely continue hiking in the coming meetings. Expectations are that the bank will hike by 0.50% in its September meeting.

There will be no economic data from the UK and the US on Monday. Therefore, the market will continue focusing on last week’s actions of the Federal Reserve.

The next key economic numbers will come on Tuesday when S&P publishes the flash manufacturing and services PMI numbers. Analysts expect that the PMIs made some modest improvements in August as the price of oil dropped slightly.

GBP/USD forecast

Turning to the four-hour chart, we see that the GBP/USD pair formed a double-top pattern at 1.2288 this month. It then managed to move below the neckline of this pattern at 1.2000 on August 5. The pair dropped below the 25-day and 50-day moving averages.

The Relative Strength Index (RSI) has moved to the oversold level while the Oscillator has moved below the neutral level. Therefore, the pair will likely continue falling as sellers target the next key support at 1.1750. This price is slightly below the year-to-date low of 1.1760.

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Bullish breakout from long-term bearish wedge pattern.

My previous signal on 19^th July produced an excellent, nicely profitable long trade from the bullish inside pin bar which rejected that level.

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 0.6875, 0.6895, 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 0.6797, 0.6784, or 0.6719.
• 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 14^th July that the AUD/USD currency pair was looking bearish so I was seeking a short trade from a return to the 0.6800 area before looking for a bearish reversal to signal a short trade entry.

The price did fall over that day, so I was at least partially correct to look to the short side, although it never got back to 0.6800 before making a significant low and a dramatic bullish bounce at the support level of 0.6683 during the second half of the day’s New York session.

We saw the US Dollar begin to sell off last Thursday, producing a major bottom here which now looks like a very significant bullish reversal. The price has broken out of the long-term bearish wedge pattern, as you can see from the broken upper trend line shown within the price chart below, which is a bullish sign.

The Australian Dollar has also received a boost a few hours ago as the Reserve Bank of Australia released the minutes of its latest policy meeting. This contained no real surprises but showed that taking all necessary measures against inflation remains a real and actionable top priority, and this is helping the Aussie rally now. Technically it has room to rise, as the price has got established above the 0.6800 area.

The advance may now be beginning to falter as the price reaches an area of a bearish inflection, but long trades remain attractive after pullbacks. I will be happy to go long if the price falls to 0.6800 and we quickly get a firm bullish bounce there.

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

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The stock market is oversold at the moment, and I think this rally is simply a way to remedy that.

The S&P 500 did rally a bit on Tuesday, showing signs of life again, but at this point it’s likely that we will continue to cease selling pressure eventually. The 3800 level is an area that could cause some resistance, due to the fact that we had bounced from there, but if we break above there, then the market is likely to go looking to the 3900 level, possibly even the 5000 level.

The S&P 500 will have to contend with higher interest rates in the United States, as the Federal Reserve is looking to tighten everything. Ultimately, the market will continue to see plenty of reasons to fall, and I just don’t see how traders will have a longer-term bullish outlook on the market, at least not at this point. The market will continue to be very noisy and I think that anytime somebody gets an opportunity to short this market, they will do so.

The 50-day EMA currently sits near the 4100 level, as it is going to continue to draw from here. If we see the 50-day EMA continues to drop from here, it will be dynamic resistance. Ultimately, signs of exhaustion will get jumped upon, and I will most certainly not hesitate to take advantage of that. The 3650 level is an area that I will be paying close attention to as well, as it has been important previously. If the market broke down below there, then it’s likely that we could go down to the 4500 level.

The Federal Reserve will continue to be very tight with its interest rates, and the market is doing everything it can to price in massive quantitative tightening. Ultimately, this is a situation that will find plenty of reasons to drop. However, I would anticipate that if the market were to break above the 4200 level, it would be a major shift in attitude, and it could be a sign that the market is finally changing trends. However, it does look very likely to happen until something changes with the Fed itself. Yes, inflation could be slowing down a bit, but it is still extraordinarily elevated and will continue to be. The stock market is oversold at the moment, and I think this rally is simply a way to remedy that.

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.

Looking at this chart, it is not till we break above the €14,250 level that I would consider going long.

The DAX rallied a bit on Wednesday as we bounced from the €13,250 level. That being said, the market is still very much in a negative mood, and it does make sense that we have not been able to hang on to all of the gains for the day. At this point, it looks as if we are going to try to recover some of the losses, but the vicious selloff that we had seen during the previous several sessions does suggest that there is still a lot of negativity out there.

The ECB had an emergency meeting during the trading session but did not announce anything important, and I believe there is probably a little bit of disappointment getting ready to be priced into the market. The DAX is the gateway to the rest of the European Union, meaning that money comes into Germany much quicker than it does in many of the other economies. The DAX is a major beneficiary of this, but at this point in time, it looks as if the market is trying to do everything it can to figure out where we are going to go next. Ultimately, the €13,250 level is an area that you need to pay close attention to. It has been important more than once, so if we were to break down below there, I think it opens up a selling opportunity down to the €13,000 level, and then perhaps even down to the €12,500 level, where we had bounced from previously.

On the upside, the €13,750 level is an area where we could see a little bit of noise, followed by the €14,000 level, which is rapidly being approached by the 50-day EMA. In other words, I believe this is only a short-term rally, and that sellers will reenter the market rather quickly. In fact, when you look at the 50-day EMA and the 200-day EMA indicators, it looks like we are in a very negative trend, and we should continue to see quite a bit of momentum. It would not surprise me at all to see a couple of days to the upside, followed by fresh selling yet again. Looking at this chart, it is not till we break above the €14,250 level that I would consider going long.

The GBP/USD pair has been in a strong bearish trend in the past few weeks

Bullish view

• Buy the GBP/USD pair and set a take-profit at 1.2300.
• Add a stop-loss at 1.2050.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.2120 and a take-profit at 1.2050.
• Add a stop-loss at 1.2250.

The strength of the US dollar pushed the GBP/USD price to the lowest level since May 2020. It crashed to 1.2127, which was about 4.2% below the highest level this month. Other currencies like the Japanese yen and the euro also crashed against the greenback.

UK jobs data ahead

The UK economy is under a lot of pressure across the board. Retail spending has dropped as inflation has surged to a multi-decade high. At the same time, manufacturing and industrial production has dropped as companies scale back their spending.

On Monday, data by the Office of National Statistics (ONS) showed that the economy contracted for the second straight month in April. This decline was worse than what most analysts were expecting. In its report, the ONS warned that the situation will likely worsen going forward.

The next key data to watch will be on the country’s employment. Analysts expect the data to show that the unemployment rate dropped from 3.7% in March to 3.6% in April. If this number is correct, ut will be the lowest level in more than a decade. It will be a sign that the labor market is tightening.

Analysts also believe that the country’s wages continued to strengthen in April. With bonuses, they expect that wages rose by 7.6%. Excluding bonuses, they expect that wages rose by 4.0%. This wage growth is still lower than the country’s inflation growth.

The GBP/USD is also falling as investors price in a more hawkish Federal Reserve. The bank will start its meeting on Tuesday and deliver its decision on Wednesday. The baseline expectation is that the bank will hike by 0.50%. Some analysts believe that the bank could surprise with a 0.75% hike.

The BOE will then start its meeting on Wednesday and conclude it on Thursday. It is also expected to hike by about 0.25%.

GBP/USD forecast

The GBP/USD pair has been in a strong bearish trend in the past few weeks. Along the way, it has formed what looks like an inverted cup and handle pattern, which is usually a bearish sign. It remains below the 25-day moving average while the Bollinger Bands have widened. The Stochastic Oscillator has moved below the oversold level.

Therefore, the pair will likely have a relief rally as it forms the handle section of the cup and handle pattern. This could see it rise back to 1.2300 and then resume the bearish trend.

There is a likelihood that Bitcoin will continue rising as bulls target the important resistance level at 33,000.

Bullish View

• Buy the BTC/USD pair and set a take-profit at 33,000.
• Add a stop-loss at 29,000.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 30,700 and a take-profit at 28,000.
• Add a stop-loss at 32,000.

The BTC/USD pair rose to an important resistance level as cryptocurrencies and stock prices turned green. The pair rose to a high of 32,000, which was the highest it has been since May 16th this year. This price was about 20% above the lowest level this month.

Bitcoin Recovers

Bitcoin price has been in a tight range in the past few weeks as investors assess the overall market conditions of digital coins.

It appears that Bitcoin is now attempting to regain its correlation with American stocks considering that the main indices have been in a strong comeback. The Nasdaq 100 index has risen by more than 10% from its lowest point in May. Futures point that the index will open in the green.

Analysts believe that the rally is happening since all the bad news have already been priced in. For example, all investors now believe that the Fed will continue hiking interest rates in the coming months.

In a statement on Monday, Fed’s Christopher Waller went a step further and said that the bank should hike rates above the neutral point in a bid to slow the economy. The neutral point is often judged to be about 2.4%.

The BTC/USD pair’s recovery is also tied to the potential recovery of the Chinese economy now that officials have signaled that they will end lockdowns.

Still, some analysts believe that these gains could be temporary. They note that the rebound could be part of buying the dip considering that the coin has crashed in the past eight straight weeks. In the past, coins and other assets tend to have some pullbacks during bear markets.

“Bitcoin just went through eight consecutive weeks in red territory and got technically oversold to levels we traditionally only see at the bottom of bear markets.”

BTC/USD Forecast

The four-hour chart shows that the BTC/USD pair has been in a slow recovery lately. It has retested and moved above the important resistance level at 30,800, where it has struggled moving above before. The pair has managed to move above the 25-day and 50-day moving averages. At the same time, the Relative Strength Index has moved above the overbought level. It has also formed a small bullish flag pattern.

Therefore, there is a likelihood that Bitcoin will continue rising as bulls target the important resistance level at 33,000.

It is likely that you will probably need to focus on shorter time frames.

The Australian dollar rallied on Monday to kick off the week and break above the 0.71 level. However, we have sold off quite drastically to show signs of hesitation later in the day, as we continue to see a lot of trouble. Ultimately, this is a market that I think given enough time will see sellers step back into the market and push things lower. After all, the Australian dollar has been in a downtrend for a while, so it does make sense that we would see a continuation of that.

At the first signs of exhaustion, which is something that we had seen during the day, I would be shorting this market. The 0.70 level underneath is a large, round, psychologically significant figure that people will pay close attention to and could cause a certain amount of noise in the market. If we were to break down below there, then I think we will probably have quite a bit of negativity getting ready to pile on.

Keep in mind that the Aussie dollar is highly levered to commodities and China. That being said, the market is likely to see a lot of concern in this kind of environment, and as a result, it is more likely than not going to be better served to fade short-term rallies. If we break down below the 0.70 level, then it is likely that we will go looking to much lower levels, perhaps down to the 0.68 level where we had bounced from previously. It is a situation in which I have no interest in buying, at least not until we break above the 0.72 level on a daily close at the very least. If we were to break above there, then we could go looking to reach the 200-day EMA. Clearing that level then allows the market to go looking for 0.75 after that.

Keep in mind that the US dollar has been strong against almost everything, so it does make sense that we will see that being the case here as well. In general, I think the one thing that you can keep in mind that we have seen is a lot of choppy behavior, and it is likely that you will probably need to focus on shorter time frames.

At this juncture, I believe that it is easier to buy the dips than it is to sell the rips.

The West Texas Intermediate Crude Oil market initially fell during the trading session on Thursday to reach the crucial 50 Day EMA. This is an indicator that begins significant support all the way down to the bottom of the channel that I have clearly marked on the chart. The fact that we have pulled back to that area and balanced is a good sign, and it does suggest that we are probably going to continue to see buyers take advantage of value as it occurs. Ultimately, I think this is a market that tries to get back to the top of the channel, which is closer to the $115 level.

It is worth noting that the candlestick does look a lot like a hammer, and it does suggest that we are going to continue to see a lot of buyers on dips. That has been the case for a while, even though the market has been rather choppy. It is worth noting that there are concerns about demand, but that being said it is likely that we are going to continue to see more concern about the lack of supply. With that being the case, we will continue to see a lot of noisy behavior. However, one of the easiest ways to trade this market is to simply pay attention to the price.

It is difficult to imagine seeing anything other than an up-trending channel at the moment, and the price has been pulling back only to find buyers yet again. There is no reason to think that it is going to change anytime soon, and therefore I think it is likely that we will continue to see more of a grind higher. The market will continue to be noisy, but at the end of the day, it is a market that is trying to find its way to the $120 level.

However, if we were to turn around a breakdown, it is not until we get below the $100 level that I become concerned with the uptrend. At that point, it is possible that we could see a significant breakdown in price, but it will take a significant amount of selling pressure to make that happen. At this juncture, I believe that it is easier to buy the dips than it is to sell the rips.

 

The pair will likely keep rising as investors target the key resistance at 1.0650. 

Bullish View

• Buy the EUR/USD and a take-profit at 1.0650.
• Add a stop-loss at 1.0450.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.0480 and a take-profit at 1.0390.
• Add a stop-loss at 1.0550.

The EUR/USD pair rallied to the highest level since May 11th ahead of the upcoming Euro area consumer inflation data. It rose to a high of 1.0560 as investors price in a more hawkish European Central Bank (ECB). The pair has risen by almost 20% from its lowest level this year.

EU Inflation Data Ahead

The euro rose against the US dollar after more ECB officials pointed to more interest rate hikes. In a statement last week, the head of the German Central Bank made the case of a rate hike in July. Further, in a separate statement, Christine Lagarde said that she was leaning towards a rate hike in July.

The loudest voice came on Tuesday when the head of the Dutch central bank said that the bank should consider a 0.50% rate increase in July. If this happens, it will be the biggest single interest rate hike that the bank has implemented ever.

Therefore, the EUR/USD pair will react mildly to the latest inflation data that will come out today. Economists expect the data to show that the bloc’s CPI rose to 7.5% in April while core CPI rose to 3.5%.

While these numbers are important, they will likely be similar to the preliminary data that Eurostat published two weeks ago. As such, they will not have a major impact on the EUR/USD pair.

The pair also rose even after the relatively strong US retail sales numbers. The data revealed that the headline retail sales rose to 8.19% year-on-year and by 1.0% on a month-on-month basis. These numbers were better than what analysts were expecting. Core retail sales rose by 0.6%., signaling that consumer spending was rising.

Other data showed that the country’s manufacturing and industrial production numbers rose by 0.8% and 1.1% in April.

EUR/USD Forecast

The EUR/USD pair invalidated the bearish flag pattern that was forming on the four-hour chart. Now, it has managed to cross the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is approaching the overbought level. The Stochastic Oscillator moved above the overbought level.

A closer look shows that the pair retested the tip of the triangle pattern shown in pink. Therefore, the pair will likely keep rising as investors target the key resistance at 1.0650. The alternative scenario is where the pair drops below 1.0440.