The inflation numbers will be in focus this coming week, and if the CPI numbers are hotter than anticipated, that will only pile on to the negativity.
The S&P 500 initially rallied during the week, and at one point looked like it was going to really start to take off. However, as the jobs number came out on Friday, we really started to see a lot of selling pressure now that it’s obvious the Federal Reserve is going to have to raise interest rates by at least 75 basis points. The inflation numbers will be in focus this coming week, and if the CPI numbers are hotter than anticipated, that will only pile on to the negativity. At this point, the S&P 500 continues to be a “sell the rally” type of situation.
The EUR/USD tried to rally during the beginning part of the week but found the parity level as far too important to get above. The parity level has been important a couple of times in the past, so it is no surprise that we have pulled back from there. At this point, the US dollar continues to strengthen, and we are essentially stuck in this pattern of fading rallies going forward. The 0.95 level is now the next target for the Euro.
Gold markets have had a positive week to break back above the crucial $1680 level. Having said that, the market then pulled back from the very first signs of resistance near the $1720 level, especially now that the US dollar has found renewed strength. I still believe that gold is going to struggle, and if we can break down below the $1680 level allows for a bigger move to the downside. If we were to break down below the weekly candlestick from the previous week, that opens up the floodgates for a move down to the $1500 level.
WTI Crude Oil
The West Texas Intermediate Crude Oil market has had a very strong week, breaking above the top of the down-trending channel that has been so prominent for most of the summer. At this point, with OPEC cutting 2 million barrels of production per day, we may have finally seen the market turn back around. Regardless, this is market is going to be very choppy and difficult to get your head around at times, so the most important thing you can do is keep your position size reasonable. The $95 level will be the next major barrier, followed by the $100 level. If we were to turn around and break back below $90, we could go looking toward $85.
Crypto is where the money went to die. That remains the case, where we continue to see almost nothing as far as momentum is concerned. The $18,000 level underneath should be supported, so if we were to break down below there, I think it kicks off the next leg lower. In that scenario, it’s likely that we could open up the possibility of a move down to the $15,000 level. After that, then we have the possibility of a run down to the $12,000 level, where the entire bull market kicked off a few years ago. This would be nothing new for Bitcoin to do this.
The DAX had a positive week, but as you can see gave back gains above the crucial EUR12,500 level. At this point, the market looks as if it is going to continue to struggle with anything positive, so I am more than willing to step in and fade rallies. Germany is under a significant amount of stress due to a lack of energy and of course the fact that winter is coming. Ultimately, the market will continue to favor the downside, at least until something changes from a central bank standpoint at the very least. Even then, a lack of growth is going to continue to be a major issue.
The GBP/USD has given back gains after slamming into the 1.15 level. The 1.15 level is a major area of interest due to the fact that it had been previous support, and it is a large, round, psychologically significant figure. This is a situation where the overall downtrend should continue, especially as we see proof that the Federal Reserve is more likely than not going to continue being hawkish, and therefore tightening monetary policy. This is a situation where the US dollar is like a wrecking ball for other currencies around the world, and with the Bank of England expecting a recession, this move lower makes quite a bit of sense.
The USD/CAD initially fell during the week, but then turned around to show signs of life in the 1.35 handle. At this point, the market is likely to continue to see a lot of noise in general, but the 1.35 level looks to be offering a short-term floor in this market. As long as we continue to see the Toronto housing market deflate, right along with Vancouver, the Federal Reserve is likely to continue to tighten and that of course causes the US dollar to be more attractive. Ultimately, I think this pair is probably going to go to the 1.40 level, but it doesn’t necessarily mean that the market gets there overnight. I would anticipate a lot of volatility, but the occasional “buy the dip” scenario should show up.