I am looking for signs of exhaustion to get involved with and will continue to buy US dollars whenever I get the possibility to pick them up “on the cheap.”

• The AUD/USD currency pair has rallied rather significantly during the trading session on Monday, but as you can see, the market seems to be struggling with the 0.70 region.
• The 0.70 region is significant resistance that extends at least 50 points.
• I think that the market is going to continue to see a lot of noise due to the fact that there are concerns when it comes to global risk appetite.

Eventual Interest Likely

At this point, the 50-day EMA sits right in the middle of the candlestick for the session, so it does suggest that it is probably only a matter of time before we start seeing a lot of interest overall. If we were to break down below the 0.69 level, that opens up the possibility of the Australian dollar falling quite drastically. At that point, the market more likely than not will go down to the 0.67 level, which is an area that has offered up massive support in the past.

If we were to break down below there, it would almost certainly come down to a major turnaround in risk appetite and the US dollar strengthening against almost everything. With this being the case, the market is likely to enter a tailspin in almost anything close to being a risk appetite asset. Ultimately, the Australian dollar would have to clear the 0.7050 level on a daily close to making a strong statement, something that it has not been able to do since June. Because of this, I think it’s likely that we will continue to see a lot of selling pressure more than anything else. Because of this, I am looking for signs of exhaustion to get involved with and will continue to buy US dollars whenever I get the possibility to pick them up “on the cheap.”

If we do break out to the upside, the 200-day EMA is an area that we need to pay close attention to and breaking above that would obviously be a very bullish turn of events. However, I think it would take quite a bit of shift in momentum overall. I don’t expect that, so I think given enough time we will break down more than anything else. Whether or not we can break down below 0.67 is a completely different question as well.

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The German DAX fell really hard to kick off the trading session on Thursday, crashing into a support area just above the €12,500 level before bouncing almost €300. This is the behavior of markets that are broken, and it is probably only a matter of time before something quite drastic happens. I don’t want to put too much money into these markets right now, because it seems like nobody knows what they’re doing, and the machines have taken over.

The ECB finds itself in a very difficult situation because it is dealing with a slowing economy that not only has to worry about slowing growth but inflation and a lack of energy production. In that scenario, the ECB can pretend that it’s going to start raising interest rates, but it will only do a token rate hike here and there because it is stuck. It’s really difficult to get dozens of economies to behave the same way, and I think the ECB is showing just how impossible that task is.

That being said, if the ECB loosens enough, then it’s possible that the DAX may be a beneficiary as so many German companies are major exporters. However, the global economy seems to be slowing down and then of course will show itself here as well. If you are a major German corporation, you have to worry about the health of your consumers, because it seems as if everybody is broken. Supply chain disruptions continue to be a major hamper to profits as well, so all of that being said, I remain bearish despite the fact that we had such a nice bounce during the day.

Be €13,500 level should offer a bit of resistance, as it was previous support. If we approach that level and show signs of exhaustion, I will not hesitate to start shorting again, because this is a market that has been very bearish for a while, and with good reason. It is not until we break above the €13,750 level that I would consider a rally one of substance, and then I think we need to challenge the €14,500 level before we can start to talk about a trend change. As things stand right now, it’s just easier to fade rallies in the DAX, just as it is in other indices.

I will be cautious about putting too much money to work right away.

The Parisian CAC Index rallied on Monday to reach the €6600 level. This is an area that featured the 200-day EMA and previous structural resistance. We pulled back from there, as equities gave back some of their early gains in general. It was not just in Paris, we also saw the same thing in Amsterdam and Germany. Because of this, it’s likely that we will see a bit of a pullback into the previous consolidation.

Underneath, the €6400 level is an area where I would expect to see some support, but between here and there we have the 50-day EMA as well. Because of this, the market is more likely than not going to be very noisy and choppy, so if you are a short-term trader, the CAC might be a great place to be over the next several days. Eventually, we will have to make a breakout in one direction or the other, leading to a couple of different possibilities.

If we break down below the €6400 level, it opens up a possible move down to the €6300 level, followed by the €6100 level. On the other hand, if we break to the upside, then it’s possible we could go looking to reach the €6800 level, where we have seen a lot of pushback over the last several months. A lot of this is going to come down to risk appetite, and it should be noted that the CAC is full of luxury goods, meaning that it is especially sensitive to risk appetite.

Typically, when we are stuck between the 200-day EMA in the 50-day EMA, you see a lot of choppy volatility before making a bigger move in one direction or the other. I believe that’s what we are getting ready to witness here, so I will be cautious about putting too much money to work right away, but I will be paying attention to those levels that I mentioned previously, as it could give me a bit of a “heads up” as to where the market may go next. Obviously, there are a lot of macroeconomic problems right now, and therefore the occasional announcement or statement could cause problems as well. Because of this, you need to be very cautious about your position size as a sudden move could take you out.

Simply jumping in right away is a great way to lose a lot of money, because these bear market rallies can be quite vicious.

The S&P 500 rallied significantly on Friday as we continue to see more of a “risk-on rally” in the market. That being said, it’s also worth noting that we are approaching an area of significant resistance, as it was previous support. I have it marked on the chart, and I believe it extends to at least the 4150 level. Even if we break above there, there are multiple other problems above.

The 50-day EMA sits at the 4200 level, and it is dropping significantly. Furthermore, I think there’s a lot of noise all the way to the 4300 level. If we did somehow break above the 4300 level, that could kick off a major trend change. However, at this point, I think it’s only a matter of time before we will see signs of exhaustion jump into the market, and then perhaps push this market lower. Remember, we are in a bearish market, and sometimes they get significant “bear market rallies” that are very punishing.

This is a market that I think has a lot to worry about, not the least of which will be the Federal Reserve. There have been rumors lately that they are not going to raise interest rates as much as people once thought, but that is pure speculation at this point. Any signs of exhaustion will more than likely be jumped upon, perhaps opening up another selling opportunity. I don’t like buying the S&P 500 quite yet, even though we have seen such a massive move to the upside.

Furthermore, you need to keep an eye on the fact that Monday will be Memorial Day in the United States, so the underlying index will not be moving. However, any bad news between now and Tuesday morning could send this market back down, so I’m just not comfortable enough to be long. I think this is a market that will continue to attract short-sellers given enough time, but I do think that we have to wait to pick our shot. Simply jumping in right away is a great way to lose a lot of money, because these bear market rallies can be quite vicious. Even though this has been a very nice rally, it’s only been three days since it started.

I do not have any interest in shorting the US dollar right now, and certainly would not do so against Brazilian real.

The US dollar rallied significantly to slam into previous support, which should be resistance, against the Brazilian real. The area between the 5.00 and 5.15 levels continues to be of interest, as we had consolidated in that general vicinity previously. As we slammed into the bottom of it during the trading session on Tuesday, we finally ran out of a little bit of momentum, which has exploded in favor of the greenback over the last several days.

At this point, the market looks as if it is going to try to reenter that consolidation area, but I would anticipate a big fight. After all, we have gone straight up in the air for three days, and although it is a very bullish sign, eventually you will get a pullback. That being said, the pullback could very well be a nice buying opportunity if we get some type of support candle. The 4.80 level should be supportive now that we have broken above it, based upon “market memory.”

I do believe that as long as there is going to be a lot of fear out there, it makes sense to consider that the US dollar should continue to throttle emerging market currencies such as the Brazilian real. In fact, emerging market currencies are some of the worst-performing out there right now, because so much of the emerging market debt is priced in US dollars. The stronger the US dollar gets, the less attractive the emerging market currencies become.

Commodity markets have underperformed as of late as well, so keep an eye on that although it is a bit of a mixed bag. The markets will more likely than not continue to see a lot of choppy volatility, so you need to be very cautious about how you put money to work. I think simply waiting for some type of pullback that shows signs of support is the best way to go, or if we can break above the 5.00 level. I do not have any interest in shorting the US dollar right now, and certainly would not do so against Brazilian real. Yes, I recognize that we are still technically in a downtrend but the US dollar can be like a wrecking ball against everything when it wants to.