The GBP/USD has had an explosive move to the upside this past week, as traders are starting to bet on the idea that the Federal Reserve is going to save everybody again. Inflation coming out at 7.7% year-over-year in the United States has people betting that perhaps inflation has peaked in America, and that the Fed is ready to pivot. However, we are light years away from that, so I suspect this bear market rally only has so far to go. If we break above the 1.20 level, you have to start looking in the other direction.
The AUD/USD has rallied rather significantly during the trading week to reach the 0.67 level. The 0.67 level is an area that had previously been massive support, so it should now be massive resistance. This has been a very bullish week, as traders believe that the Federal Reserve might step in and start pausing or even pivoting. The 7.7% inflation number is extraordinarily hot, so that being said I think it’s a bit rich to think that the Fed is suddenly going to change everything. The 0.67 level is an area that I think could cause the resistance necessary to turn this market around. If we get a bit of negativity here, the Aussie may turn around and break down to the 0.65 level.
The USD/CAD plummeted during the week, breaking below the 1.35 level. Ultimately, the market ended up reaching down to the 1.3250 level, which was the beginning of support. Oil is starting to build up bit of a bullish move, so that does help the Canadian dollar. Furthermore, you have to pay attention to that whole idea that the Federal Reserve is ready to pivot being in the minds of traders. Regardless, I think this is a short-lived rally for the Canadian dollar, and a supportive candlestick could turn things around, perhaps somewhere near the 1.30 level.
The USD/JPY has plummeted as interest rates have been dropping globally. Keep in mind that this pair is moving mainly on the idea of the Bank of Japan doing everything it can to keep interest rates lower. By doing so, they are essentially “buying unlimited bonds”, pouring Japanese yen into the market. As you can see, the candlestick for the week is brutal, and it does suggest that we have further to go to the downside. That being said, I think it’s probably only a matter of time before things turned around, because the inflation numbers at 7.7% in America are hardly any reason to think that the Fed is going to pivot.
The USD/CHF plummeted, as we have seen a massive amount of concern. The 0.9350 level is an area that previously has been resistance, so now it should be supported yet again. If we can bounce here, the market may bounce around in a potential consolidation area, but this clearly looks like a market that’s ready to drop even further. A lot of this comes down to interest rates in America, which people are thinking that they are going to drop. After all, inflation is down to 7.7%, so therefore traders suddenly think that inflation is beaten. I get the sneaking suspicion they are going to disappointed. I do believe that the US dollar recovers, but this is a situation where the market may have further to go.
The EUR/JPY has fallen hard to reach toward the ¥143.50 level. That being said, the market had previously offered resistance in this area, so it should now offer support. By pulling back the way we have, we have not changed much, and most of this was probably due to interest rates dropping and allowing the Bank of Japan to ease up on the policy that they had been involved in, buying unlimited bonds. Because of this, we have seen everything fall against the Japanese in, but more likely than not we are getting rather close to a potential buying opportunity.
The S&P 500 has rallied significantly during the trading week to break above the 3950 level. At this point, the market is threatening the 4000 area, where we should see a 50-Week EMA come into the picture and cause some problems. That being said, it looks like the market is willing to step in and by the S&P 500 and hold onto it. This suggests that we do have further to go, but it probably is somewhat limited at this point in time. Ultimately, the 200-Week EMA has offered support, but at the end of day we still have a lot of noise when it comes to interest rates.
WTI Crude Oil
The West Texas Intermediate Crude Oil market has fallen during the course of the week, but it does look like there are buyers in this general vicinity. Typically, this is a market that likes to consolidate for a while before making a bigger move. The 50-Week EMA is right in the middle this area as well, and it looks like the market is comfortable bouncing around between the $85 level on the bottom and $95 level on the top. With this, I think you continue to see a lot of neutral behavior, meaning that you probably have to focus on short-term back-and-forth type of moves.