The market is more likely than not going to continue to drift lower, perhaps trying to test the lows near the $1680 level, but I would be surprised to see it go any lower than that anytime soon.

• Gold markets got hammered during the trading session on Friday after Jerome Powell gave a very hawkish speech at Jackson Hole. At this point, the US dollar looks like it’s reasserting its dominance, and that of course he’s going to have a major influence on where we go next.
• This is a market that I think given enough time may retest the $1720 level, possibly even lower than that.
• The market has been very noisy and had tried to rally but now it appears that people are finally getting it through their heads that the Federal Reserve is going to have to stay rather tight going forward.

This should bring interest rates higher, and it should continue to drive the US dollar higher. The US dollar being stronger obviously works against the value of commodities priced in that same US dollar, but it is worth noting that the market did not necessarily meltdown during the day, it just lost 1.2%, well within the tolerance of normalcy.

Market Likely to Drift Lower

The market is more likely than not going to continue to drift lower, perhaps trying to test the lows near the $1680 level, but I would be surprised to see it go any lower than that anytime soon. If it does, that opens up a massive amount of selling pressure that could send gold down to the $1500 level.

If the market rallies from here, the $1760 level will be the first carrier, followed by the 50 Day EMA and then the $1800 level. The $1800 level is an area that previously had been supported, and of course, we have seen a lot of resistance just recently. Because of this, the market will continue to be one that you have to watch through the prism of a downward trend, and it’s not until we clear the 200 Day EMA above that I would assume things have changed at all. The market breaking above that level then opens up the possibility of a move to the $1850 level. Breaking above that level then opens up the possibility of $1900 and more of a “buy-and-hold” type of situation. I do think the gold eventually takes off, but we are nowhere near that right now with the central bank still out there fighting inflation. Higher rates equals lower gold.

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 I have no interest in buying this pair anytime soon, at least not until the fundamental situation changes.

The GBP/USD initially tried to rally during the training session on Friday but gave back early gains as Jerome Powell made it abundantly clear that the Federal Reserve was going to remain very tight and continue to focus on inflation, not other economic indicators.

As a result, the US dollar spiked during the trading session, and it now looks as if we are going to see the next big move in favor of the greenback and of course a significant “risk off” type of move. The market breaking down below the lows of the last several sessions could open up a move down to the 1.15 level. The 1.15 level is my longer-term target, but it is more likely than not going to be very noisy. Any rally at this point in time still continues to look suspicious at best, and the 1.20 level could be the next area of resistance. That being said, the 50 Day EMA sits just above there as well, so it would make a significant amount of sense that we would see sellers in that area if we do rally. Ultimately, I think it’s going to be difficult to break above all of that, let alone even go higher.

Market Likely to Drift Lower as Britain Enters into a Recession

• This is a market that has been in a downtrend for quite some time,
• It makes sense that we would see a continuation of this trend for the time being.
• The market certainly has shifted to the downside during the day, and I think it’s probably only a matter of time before we pick up momentum to the downside on any rally.

The Bank of England has already stated that the British economy is going to go into a recession, so there are no surprises there. In that scenario, it’s likely that the Bank of England is done doing any type of tightening, as the economy is going to be too fragile. The market will ultimately be a situation where there is no real reason to buy this market, and therefore I will be waiting for opportunities every time we rally. This was an excellent shorting opportunity on Friday, and it’s likely that we continue to see negative pressure going forward. I have no interest in buying this pair anytime soon, at least not until the fundamental situation changes.

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It’s difficult to imagine what’s going to change the market, and that’s not going to be anytime soon.

• The AUD/USD initially tried to rally during the session on Friday but gave back gains as the market has been turned around.
• The speech at Jackson Hole by Jerome Powell was much more hawkish than people anticipated, so at this point, it looks like the US dollar is being flocked to yet again.
• As I record this, we are breaking back down below the 0.69 level, and therefore it’s possible that we could go much lower.

Breaking down below the recent pullback opens up the possibility of a move down to the 0.68 level, possibly even the 0.67 level. This is a market that has been negative for quite some time, and it is starting to look a lot like the stock markets, so it seems as if we are going to follow stock markets as far as risk appetite is concerned. Rallies at this point still look to be very tentative, and at the first signs of exhaustion, I am more than willing to start shorting.

Downward Pressure Ahead

The 50-Day EMA sits just above and is offering a significant amount of technical resistance, sitting just below the 0.70 level. The 0.70 level is an area that obviously is a large, round, psychologically significant figure, and an area that you will be paying close attention to. The size of the candlestick also tells me that we more likely than not will continue to have downward pressure, so I think it’s essentially a situation where we have already made up our minds as to which direction we are going.

It’s not unless something changes quite drastically with the Federal Reserve that I see this market changing, and it’s hard to imagine that they would immediately after talking about how hawkish they wanted to be. In fact, it’s not even that they were leaving much doubt, it’s just that traders for whatever reason chose not to pay attention to the Federal Reserve. I think they finally got the picture during the Friday session, so we should resume US dollar strength going forward. With the type of move that we have seen, do not be surprised to see a little bit of a short-term relief rally, followed by another hard pounding to the downside. It’s difficult to imagine what’s going to change the market, and that’s not going to be anytime soon.

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