Be cautious about jumping in with a huge position until you get reasonable confirmation for your trade.

The West Texas Intermediate Crude Oil market fell during most of the session on Wednesday but did see a bit of recovery late in the day. What’s interesting is that people are suddenly focusing on the lack of demand due to the recession, which is something that you would have thought had to cross their minds before. However, it does not look like it has, so we had a little bit of panic selling. It looks as if the crucial $100 level has held though, and that’s probably more important than the uptrend line.

This is going to come down to demand, and whether or not good signs of reopening in China are enough to overcome recessionary fear in the West. I think at this point it’s going to continue to be a bit of a battle, but it is worth noting that the commodities markets have seen sudden selling pressure and natural gas and copper as well, both markets that had previously been doing fairly well. There’s an old expression, something about shooting generals when things get bad. That might be what was seen here, so you will most certainly have to pay close attention to this market.

If we were to break down below the $100 level, that could change a lot of attitudes, perhaps even have people start to short this market. As things stand right now, I’m not necessarily comfortable shorting this market because we are still very much in an uptrend, and it is worth noting that there was a significant attempt to save the market today. If we can break above the $110 level, then I think the overall uptrend continues, perhaps strong enough to make a run toward $120 above.

You will have to keep an eye on inventory numbers, some of which come out on Thursday, employment numbers, GDP, consumer sentiment, and everything else in the world right now that seem to be throwing the markets around. If we are in fact going into recession, one would think that oil has only a limited amount of upside, but right now it looks as if nothing has changed, at least not enough to change the overall attitude of this market, so be cautious about jumping in with a huge position until you get reasonable confirmation for your trade.

The Euro has broken down during the trading session on Tuesday to break through a short-term uptrend line. You can make an argument that we have pierced the bottom of a rising wedge, but it’s also worth noting that the market did a lot of recovery later in the day. In other words, we are still spinning our wheels and trying to figure out where we go next.

With inflation numbers in America coming out on Friday, it could very well be a situation where we are going to kill time between now and then. I certainly know that the market has been choppy enough to make it feel like that. If we do rally from here, the 1.08 level is a significant amount of resistance, as it was previous support. We also have the 50 Day EMA just about, and that will more likely than not show quite a bit of noise as it typically does.

If we were to break down through the bottom of the candlestick, then we could go looking to reach the 1.06 level, possibly even down to the 1.04 level, which would be a fulfillment of the measured move of the rising wedge. Breaking below the 1.04 level opens up the possibility of a move down to the 1.02 level, followed by parity. A lot of pundits do believe that the Euro will eventually go to parity, but it’s obvious that we are fighting to see that happen.

Interest rates will drive everything, and at this point, some traders are starting to think that the European Central Bank will have to become a bit more aggressive with its monetary policy, due to inflation in the continent. However, the Europeans also have a growth problem, so it’s a much more complex situation than the very complex situation in the United States. In a situation where we will more likely than not continue to see a lot of concern, it also makes sense that the US dollar would be favored. We are in a downtrend, so I have to assume that the sellers will continue to come back into the picture. However, if we were to break above the 1.09 level, then we may make a move to reach the 200 Day EMA, which is at roughly 1.1140 at the moment.

Gold markets bounced a bit during the session on Tuesday to reach above the $1850 level. This is right in the middle of the recent consolidation area, and therefore it’s not a huge surprise to see this happen. Whether or not this was a reason to get involved is a completely different question, but I think at this point we are more likely than not going to see a lot of back and forth. In other words, we have nowhere to be and that makes quite a bit of sense considering that the markets are waiting on inflation numbers coming out of the United States on Friday. In other words, I think you have more of this ahead.

The 50 Day EMA above will more likely than not cause quite a bit of resistance, followed by the fact that it is sitting at the $1875 level, an area that has been important a couple of times anyway. Because of this, I think it’s probably only a matter of being patient enough to wait for some type of breakout. That might actually be next week, so gold is a market that I’m not that interested in. If we were to break above the $1880 level, then I think we can look into the $1900 level, followed by the $1920 level. After that, the market could go as high as $2000. The market going that high would take quite a bit of momentum though, so I’m not necessarily holding my breath for that.

If we were to turn around and break down below the lows of last week, then it’s possible that we could go down to the $1800 level. $1800 level is a large, round, psychologically significant figure, and of course, an area where we have seen action in the past. It’s also worth noting that the market will be approaching a two-year uptrend line in that general vicinity as well, so I think it’s probably only a matter of time before we find buyers on any type of breakdown. After all, there are a lot of concerns when it comes to safety other, and then it does help gold overall. But the US dollar can work against it at times as well, and I think we continue to see a lot of noisy behavior more than anything else.

The pair will likely keep rising, with the next main resistance level being at 1.2640.

Bullish View

• Buy the GBP/USD pair and set a take-profit at 1.2640.
• Add a stop-loss at 1.2450.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.2496 and a take-profit at 1.2400.
• Add a stop-loss at 1.2550.

The GBP/USD pair held steady as the US dollar continued its bearish momentum. The pair is trading at 1.2530, which is about 3% above the lowest level this year. This price action mirrors that of the EUR/USD and the AUD/USD pairs.

Slowing Economic Growth

A picture is emerging in the UK and the US that the economic growth is starting to slow. On Tuesday, data by S&P showed that services and manufacturing output declined this month as the cost of doing business rose and as the Chinese lockdowns continued.

In the UK, the manufacturing PMI declined to 54.6 while the services PMI fell to 51.8. The same trend happened in the US, where the two inched downwards to 57.5 and 53.5, respectively.

Other numbers have painted a picture in which these economies are falling. For example, with mortgage rates rising in the US, data showed that new home sales declined to the weakest level since the pandemic started. They declined by 591k units in April from the previous 750k. Economists expect this trend to continue for a while.

Meanwhile, energy costs in the UK are expected to keep growing. According to Ofgem, the energy price cap will rise to 2,800 pounds in October from the current 1,971 pounds. This will be the biggest jump in energy prices since 1970s.

As such, there is a likelihood that the country’s inflation will keep rising in the coming months. Data published by the ONS showed that the UK inflation rose to 9% in April, the highest point in decades.

The GBP/US will react to the upcoming US durable goods order numbers that will come out in the afternoon session. The Fed will also publish the latest minutes, which will shed a light on the deliberations by officials.

GBP/USD Forecast

The GBP/USD pair formed a break and retest pattern in the overnight session. The pair did this by retesting the important support level at 1.2496, which was the highest level on May 18th. The pair has remained above the 25-day and 50-day moving averages.

It has also moved slightly below the 38.2% Fibonacci retracement level. Also, the uptrend is being supported by the ascending trendline shown in black. Therefore, the pair will likely keep rising, with the next main resistance level being at 1.2640.

The US dollar strengthening has been a bit of a wrecking ball against most commodities, and we are starting to feel that in crude oil as well.

The West Texas Intermediate Crude Oil market broke down on Monday as we continue to see a lot of concerns when it comes to global growth. After all, if global growth continues to falter, that will more than likely drive down demand for crude oil. After all, the market continues to hang at this uptrend line, and as long as we can stay above it, there is still hope for the oil market to go higher.

That being said, you should pay close attention to the OVX, because it has shown that there has been a lot of volatility in the oil market as of late. As long as we continue to see elevated volatility in this market, it is difficult to imagine a scenario where we see crude oil has an easy route higher. This is not to say it cannot rally, just that it is going to be very difficult. At this point, I would need to see a break above the highs of the trading candlestick for Monday, as it could open up the possibility of a move to the $104 level. After that, then we have a downtrend line that a lot of people will pay close attention to.

If the market were to break down below the bottom of the candlestick for the trading session on Monday, then it is very likely that we will make a serious attempt to break down. Breaking down below the uptrend line opens up a move to the $95 level, and then possibly even down to the $90 level. The $90 level is an area where you would see a lot of noise, and interest due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen action in the past. After that, then we would have the 200ay-d EMA possibly coming into the picture, which is sitting right at the $85 level.

Keep in mind that we will continue to be very noisy, and a lot of this is going to come down to whether or not we have risk appetite in the overall markets. The US dollar strengthening has been a bit of a wrecking ball against most commodities, and we are starting to feel that in crude oil as well.

Confused yet? Good. That is exactly the way most traders are right now.

The West Texas Intermediate Crude Oil market took off to the upside on Tuesday as the uptrend line has been tested, and it has been strong enough to turn this market around. At this point, we then broke above the 50-day EMA, which is a very bullish sign, and the size of the candlestick does suggest that there is some real push underneath. Because of this, if we can take out the top of the candlestick, then we may go looking to reach the $105 level.

At this juncture, the uptrend line continues to be very crucial, so as long as we stay above the lows from the Monday session, I think we will have the possibility of the market saving itself, but it does not necessarily mean that you should jump in and started buying right away. After all, the market is very noisy, and we have seen a lot of selling pressure as of late.

You can also make an argument for a falling wedge, which is a bullish pattern, but really at this point, I do not have any interest in trying to get too bullish, at least until we see a little bit of follow-through. If we get a little bit of follow-through, is likely that the market will continue to try to grind higher, maybe even as high as the $115 level.

It is probably worth noting that this was a very bullish candlestick, but if we were to turn around and break down from here, that would be an extraordinarily bearish turn of events. Breaking down below the Monday candlestick probably reaches toward the $90 level after that, and then possibly even the 200-day EMA. The 200-day EMA is something that longer-term traders pay attention to, and it is down at the $83.37 level. Beyond the “falling wedge”, you can also talk about a descending triangle. Confused yet? Good. That is exactly the way most traders are right now when it comes to crude oil because there are major concerns about demand as global economies continue to look like they are about to slow down. A slow economy does not need much in the way of oil, and the Americans are starting to finally pump out more.

I do believe that it is probably easier to break down than it is to have a sustainable rally at this point, but it is possible that we will get some type of turnaround.

The West Texas Intermediate Crude Oil market fell on Monday to pierce a significant uptrend line. By doing so, the market looks very likely to continue going lower, especially if we break down below the lows of the Monday session because it would show even more continuation of the downward pressure. It is also worth noting that the 50-day EMA sits just above the last couple of candlesticks, so it certainly makes sense that we would continue to see downward pressure.

Furthermore, you can see that structurally we have been making lower highs along the way, and now we are getting close to making a very significant “lower low.” If that is going to be the case, the $90 level will be targeted, and then perhaps even lower than that. If we break down below the $90 level, then I think it is probably only a matter of time before we go looking to reach the 200-day EMA.

Alternatively, if we were to turn around and break to the upside, the $104 level would have to be overcome on a daily close. If that were to happen, then it is likely that we could go looking to the $110 level after that, which is a significant previous area, and an area where we had seen a bit of a struggle. Once we clear all of that, I might be convinced that the oil market is going to recover for the longer term, but at the end of the day, it is worth noting that there is a lot of demand destruction out there due to the fact that we are getting ready to have a massive recession in a lot of developed countries.

I do believe that it is probably easier to break down than it is to have a sustainable rally at this point, but it is possible that we will get some type of turnaround. At this point, it still favors the downside as we have seen a “lower high” on the longer-term chart as well. We just have not broken down below the support level from the parabolic move for a couple of months ago, and once that gives way, that would open up a massive amount of shorting opportunities.