 Hi my name is Leon Rowe, currency trader and trading coach at Trading180.com and welcome to this week's Forex and Gold fundamental and technical analysis. If you like the weekly videos that I provide, don't forget to like, subscribe and share with your fellow trading colleagues. And so getting into the week ahead for May the 15th and zoom in a bit. In the US the spotlight will be on speeches by several fellow officials and retail trade data followed by industrial production and several housing indicators including housing starts, building permits and existing home sales elsewhere. Second quarter GDP growth rates will be released in Japan. That will be important because it's their first second quarter GDP reading and moving on investors will also be closely following industrial production and retail sales with China. Again China is important for global growth so that would definitely be important as well as inflation rates for Canada and Japan and again inflation is really should be watched because it really kind of at the moment is dictating to central banks where they should be holding or hiking at the moment or even potentially looking into cutting the future towards the end of the year and unemployment rates for the United Kingdom, France and Australia. Additionally the ZEW indicator for economic sentiment for Germany and the GFK consumer confidence indicator in the United Kingdom will be interesting to watch. So that's what's coming up this week and before we get into the usual technicals I did a video breaking down the fundamentals surrounding the Euro dollar the first quarter fundamental review and that will be at the end of this video. So I go back look at the first three months January February March and look at the fundamentals and how it affected price. So you can really kind of get an idea and an understanding of a fundamental understanding a basic understanding of how fundamentals do affect price over the medium to long term and so don't forget to watch that at the end of the video. So let's get into the charts and looking at the dollar index was just a measure of a strength of the dollar against the basket of currencies and fundamentally we've got risk events on the horizon. So stock traders stay calm about US being on cusp of the force of credit the false swaps are spiking as the VIX stays unchanged and Rao could create buying opportunity if debt deal is struck says city. So the debt ceiling standoff in Congress has the US at risk of being unable to pay its bills as soon as June the first you think stock market investors would be anxious about the uncertainty but you'd be wrong while hedging activity is picking up on the fringes there are few signs of panic expectation for price swings in stocks most sensitive to a government default still hovering near a two-year low and so that's interesting but make no mistake the risk is real Treasury Secretary Janet Yellen said Friday that the US will have to default on some obligation if Congress doesn't raise the debt limit it's just equity investors don't seem to care or maybe they're just expecting that the deal is going to get done anyway right and so the uncertainty around the debt ceiling is like kicking a man when he's already down said and Phillips the managing director of portfolio strategy at EP wealth advisors depending on what happens with debt ceiling we could see additional fiscal drag in addition to monetary policy that would eventually need to be reflected in stock valuations because it's not showing up yet so it hasn't been priced in yet and in the bond market investors are on higher alert the cost of credit default swaps ensuring Treasury is against a default is higher than contracts on bonds of countries like Greece and Brazil but things are more complacent in the stock market so it doesn't look like the stock market is too concerned the bond market is and it talks here as well that the US economy is potentially approaching a recession after the Federal Reserve's most aggressive monetary policy tightening campaign in a generation and a crisis in the banking system is still simmering so there are definitely lots of risks on the horizon for the for the US dollar and the Fed's Jefferson designation high but policy on track and so yeah we've got also monetary policy opinions from Fed Governor Philip Jefferson said in the progress on inflation this year has been mixed but noted that policy takes time to percolate through the economy and is well on track and the the US central bank earlier this month indicated that it may be ready to pause its rate hiking campaign which last year include four consecutive 75 basis point increases before slowed down in the last six months as it assesses how the policy works its way through the economy but policymakers haven't committed yet to an end of date of the hiking cycle saying instead they are pivoting to a meeting by a meeting approach to to decision-making and weighing all available data as inflation has called more slowly than they have expected so there are I think all central banks are going through the same thing but particularly in the US inflation has remained sticky and so although the expectation is for the Federal Reserve to actually hold rates so if you go to the CME Fed Watch tool you'll see that in fact there's an 84 percent chance of a no change and a 15 percent chance of a hike at the moment it's being priced in to the market and this can change based off of whether inflation stays high or remains you know obviously where it is or starts to continue to come down but the expectation is that inflation will come down which would then mean that the Fed are less likely to hike which then would put a cap really on the dollar upside and all the risk events that are happening potentially so that they will but with the US potentially going into a recession banking risks risks that the America won't pay their debts or won't agree to raise the debt ceiling are all also weighing on the the dollar potentially so let's see what happens there my bias is still to short the dollar and it's come up to a decent level so for me I think this could be a decent area to look for confluences to short we wouldn't short the dollar index but you would short you know if it's coming up into a supply zone on the dollar index then you would look for potential supply zones on the dollar yen to get involved in so there's the the dollar the dollar index and again the levels in between that and we're looking at technically I think it's come up to a decent area the 102 50s and even the 103 50s I think a decent area is to look for potential reversals so I think the one of threes would be definitely a nicer better place to look to short the the dollar um dollar yen so the dollar yen again the Fed is expected to hold rates and the bank in Japan are holding rates but possible yield curve control adjustment in June or July around that time yield curve control adjustment um would actually appreciate a the currency and so I my my bias overall is to actually get short on this currency pair so I'm really looking for a decent pullback this level has been touched several times in fact this supply zone so it's not necessarily the freshest area of supply and so for me um I think the level just above it if you can get to the 138s 139s I think that would be really nice for a for a short trade and so yeah that's where my my bias is in the short term though you could see obviously the dollar starts to you know to rally um especially if there's good news that comes out for the dollar I think the dollar could actually um you know move higher against most currencies but that just creates for me a an opportunity to get you know the short at better prices and so um yeah if you are looking for short trades just be careful that if you are shorting or attempting to short this area 137s this level has been several times and so uh the the more times the level is touched it's uh the weaker it becomes but if you do want to be a buyer of the dollar against the yen then um you know you should have really got involved in here any pull backs into the 133s I think a decent buying opportunities potentially get rid of that and um yeah I think that's pretty much where we are dollar swiss uh dollar swiss same scenario where um if I was looking to get involved in this pair it would be to the short side based off a more risk sentiment um the swiss national bank are actually hiking especially to hike one more time and there are um slightly a bit more hawkish and the federal reserve are and so there are opportunities I think for a decent pullback to the 1950 area 91 area 91 cent area for you to get or for me anyway is a financial advice uh for me to get short on this um this zone here also as well there is the added confluence or one of the confluences of a decent area of resistance where that area has been traded so um yeah I do think that if prices do break above this level when you look to the left again it's been touched once um already so not say that it can't react off of here and go to the downside but I think this is going to be a better fresher area of supply to look for uh thought trades um dollar CAD and the dollar's valid against the Canadian dollar um from last week so um I was saying that we could see prices bounce off of here and obviously you're seeing the analysis and it actually did come Monday and um or there was a deeper pullback if you want to be a buyer of the dollar which obviously it didn't do the prices have come back into the supply zone and you'd have to really want to be a buyer of the Canadian dollar um in order to get you know short on this for me it's not really a pair that I'm interested in if I was looking to you know trade this pair it would be more on a dollar buy based off of potentially higher than expected inflation and maybe with the Fed expected to hike maybe one more time um well they expected to hold rates but they may surprise the market by hiking one more time and that would you know send the um the dollar a lot higher in valuation against the Canadian dollar who are actually holding uh rates uh why have I got one more hike expected sorry that's a bit outdated you're actually holding rates go and hold um New Zealand dollar uh US dollar zooming out again we've come up to a supply zone last week where we did sell off I think the sell off was more driven by some disappointing news out of China and um in China's recovery but overall um this one is a pretty big bit more difficult to read the RBNZ are expected to hike one more time and the Fed are expected to hold rates so um I think any buying opportunities uh would be decent down at these lows of course you've got um the first area of demand here and even a demand zone um here at the moment but I think from an overall uh auction or range perspective I think the cheapest price is going to be down at these 61 uh cent area just below that of course you know any trade traders are going to try their luck here which actually a decent area to look for um uh buy trade technically because you do have that level of uh support and resistance in that zone so let's see what happens but not really a pair I'm interested in trading I am interested in trading the pound dollar which is actually putting back quite nicely to some zones that I uh think prices may uh reverse albeit found by markets be a decent bargain so um we did have some data this week um the uh UK economy growth was at 0.1 percent uh wasn't great um I think it was underwhelming but at least they avoided any kind of uh uh negative growth and this is why the UK sluggish growth rate is too much for the Bank of England central bank worried inflation will persist for longer strong jobs market and fewer workers fueling wage price spirals so Britain's economy is headed for a period of sparring growth just above the threshold or recession but for now even a hesitant pace of expansion is ringing alarm bells at the bank of England so the so basically what this article is saying is that when you hike rates too much um you can have it has an effect on the economy and so if inflation remains high and they have to keep hiking then the the the tradeoff with that is that although the um the pound might may appreciate your um or what they are doing is causing a contraction in the economy to come a lot sooner and so um you know the UK central bank is anxious to return to return double digit inflation back to the 2 percent target and has estimated the economy can grow at a dismal pace um can only grow sorry at a dismal pace without adding to upward pressure on prices and so again it's a delicate balance in acts you hike rates which is fine but um you know you're going to affect economic growth but if you hike too much uh the Bank of England sorry Bank of America expects another UK rate hike after hawkish Bank of England forecast and so economists at Bank of America are now predicting another rate hike from UK central banking in June after policymakers warned on Thursday of persistent food inflation so the Bank of England did hike this week and so um they are still hawkish but they got one eye on the economy um and so they're going to be again quite concerned um they can put in probably hike one more time but they know that if they keep hiking then um contraction in the economy the potential recession is near especially because growth really wasn't great um in the latest reading so going back to the pound dollar um for now I am still bullish on the pound of course we have to watch economic data I think if the the economic data supports a rate hike continue to support a rate hike then I think these areas here are going to be nice for a buy trade in fact probably maybe something right now or down into those one two three uh 50 areas I think that's going to be a uh a decent bargain price was due for a pullback especially when you look at this on the on the weekly timeframe you know you just have one two three four five six weeks and then you have a pretty much a week where the close is pretty much right at it's uh it's open it'll start of the week and then you have another three weeks where you have bullish um uh closes for the week and so we do when you get moved like this with no decent pullback a pullback is is expected so I wouldn't be surprised prices came down to the one two twos wouldn't surprise me if prices came down to there um and that really would represent some sort of fair value I think from that high to the low let's just uh have a quick look so uh yeah fair value is at the moment is at the one two two four four ones so between this high it that's expensive for the other pound and this is a bargain for the pound then I think fair value is going to be one of the areas to definitely start to look to uh scaling a bit more but um the first options would be at the one two three fifties and then down to the one two threes moving on to the euro dollar and your dollar again same thing like the pound where we're you know we're heading back now down into um interesting areas of um demand this area obviously was quite expensive and one of the things I was telling the guys in the mentoring group is to keep an eye is not trying to get drawn into uh price when it's at highs it's trying to buy at highs it's always going to be pullbacks and so pullbacks can be scary when you see these large candles going against you you think oh it's time to sell the uh the euro dollar but uh if fundamentally nothing has changed then um then in fact all this is doing is just coming down to a price where you probably want to be a buyer and it's more of a bargain and buying at highs right and with the the ECB expected to um to hike and they're one of the most orcish central banks at the moment um my money is on um um buying the euro against the dollar at the moment and so uh ECB tightening path is still is in home stretch uh Gwendoz tells Sol or Sole the European central bank is in the final leg of this historic uh cycle of interest rate increases according to Vice President Lewis the Gwendoz we have now entered the home stretch of our monetary policy tightening path Gwendoz told uh I think Il Sol 24 or I think that's how you pronounce it and that's why we are returning to normality the 25 basis point steps so that's quite interesting um but we have a hawkish central banker who says Mr Nagel says nothing is off the table um for September meeting so Gwendoz bank chief speaks to Bloomberg television in Japan officials are stressing that rate hikes aren't over yet so um European central bank governing council uh Joe Shim Nagel refused to exclude that interest rate increases may persist beyond the summer so he says inflation is still very sticky um where he's attending a group of me he said describes price gains is very stubborn phenomenon so um either way you look at it it looks like um the the uh ECB are not done uh hiking yet where as you can see the difference with uh the US for example who are just you know more likely to be on hold right and said there's a divergence there and so for me um you know I'm looking to buy the euro um around these prices decent pullback uh decent discounts down into fair value and so let's see what happens on this against isn't financial advice please do your own uh your own research right um and if it makes sense then um then you can place your your hard earned capital um on a trade but not too much of course manage your risk so uh there's that if you are looking to get short on this currency pair though if you are there are supply zones there's a quite a large supply zone up top right which is pushing prices down and you can look for a pullback into these one oh nine fifties one 10 areas to look for potential short trade uh Aussie dollar in fact uh I think I am I say I think but I am more bullish on the Australian dollar one of the reasons why was because they hiked they did a surprise hike and they are actually quite hawkish um uh and also as well China start to grow again even though they were disappointing data and I think it was inflation data I do think that the that could reignite the Australian dollar to go long so for me this area at the lows and just below it I think a really nice areas to look for any kind of buy trades you can see last week obviously prices came up to this area on the uh for the for the uh US dollar and moved again disappointing news for China I think that's what's happened it's really kind of the Australian dollar was sold off but I think this is obviously clearly seen this area here seen as a bargain price for the Australian dollar as far as an exchange rate and so I do think that prices do come down here and even just below that would be really nice for a bife and the Australian dollar would be a bargain down here but again that really depends on a um how hawkish the RBA are and be uh China's growth as well and looking at gold so gold and waiting for a pullback on gold um hasn't quite pulled back I don't really want to be buying at these highs I do want to be buying in this uh demand zone and prices did make new highs so you can actually technically draw the demand zone there I'm going to make this supply zone a bit uh dinner maybe up top here um so yeah you can wait for pullbacks which I think I would want to do um especially down into these 1980s 1960s but prices may not get down there reason being is because we have gold looks best hedge as debt ceiling angst builds RBC says so recent games have put bullion within reach of record higher potential US rate cuts this year also supporting the metal so mounting fears over the US debt ceiling crisis will have will benefit gold as investors brace for potential chaos in financial markets according to RBC capital markets so hope for a deal to avert the first ever US default was set back after President Joe Biden and House Speaker Kevin McCarthy postponed the meeting on Friday that had been aimed at resolving the impasse however the delay signals that staff level talks were yielding pro uh progress according to people familiar with the matter RBC market strategist Christopher uh Looney said that the fraud negotiations had set the stage for near-term boost to bullion which is within striking distance of eight record high even assuming a deal is eventually reached we would disregard potential growing financial angst as the we wouldn't sorry disregard potential growing financial angst as the deadline approaches he said in a note in the near term we believe gold looks like the best hedge so if you are a doom and gloomer then um obviously you would want to look to buy uh gold so I think any pullbacks are going to be decent buying opportunities because even though even if a debt ceiling um is obviously agreed and extended there's still more um uh risk events on the horizon US recession banking fears credit crunch fears etc so I do think the path of this resistance is to the upside on gold so any pullbacks deep pullbacks are obviously better um and cheaper to buy gold for the upside if this happens gold um there was not a call I think it was last week or the week before um in and last week's video where um I showed that central banks are buying gold I think China is buying gold at a record pace for like the sixth month in in a row so central banks aren't just buying gold um just to kind of sell it you know two weeks later right or a week later they buy gold for the medium to long term so um regardless of what price does in the short term I think gold will still be a buy and if pulled back to that 19 especially in 1940 area I think that's going to be a really nice technical area to look for um a buy and so um that brings us to the end of this week for those who are interested um in the pairs that I am watching um this is normally reserved for the members in the private discord group um but I thought I'd just show you guys what you know pairs I'm really interested in and the ones that I'm interested in are the uh dole yen uh short euro dollar long pound dollar long uh euro cad long pound cad long um ozzy cad long and ozzy dollar long I've got several on my watch list where I'm interested um for a particular maybe setup I'll just keep watching based off of risk off and risk on sentiment but that's really my uh my trades for the week and also as well if you do want to get access to more in-depth um analysis not only fundamentals but technicals I do have um a mentoring group you can go to trading 180.com and here are you know my videos that I produce pretty much um every day if not every other day for the for the guys and uh the last one was in depth um a technical and fundamental analysis actually on the pairs that I am looking to trade and trade setups as well as we have our weekly group call on zoom so if you want to you know everyone who's in the group asks questions it's a live group call and I have it every single Wednesday in fact I had it on Thursday this this week because um I heard for the first time in years simply because I got caught out by the the king's coronation I thought um my days were messed up but anyways we still had it and um yeah the information and in-depth analysis is all there stuff that you don't will never see on on YouTube anyways that's it for this week guys don't forget after this analysis you have the euro dollar q1 fundamental review to watch so um hope you enjoy that um uh as well and uh take care and uh speak soon hi my name is leon row currency trader and trading coach at trading 180.com and in this video I'm going to review the euro dollar for the first quarter of 2023 and really get a look into how fundamentals affected price and if you're new to the channel I will welcome to you and if you're obviously returning an equally warm welcome to you and um if you don't know I am quite fundamentally driven I use fundamentals for my directional bias and look for the technicals as timing and if you want you to fundamentals or don't necessarily understand fundamentals or having a hard time in understanding the fundamentals and applying it to your technicals and really want to try to improve your trading I have this video obviously that you're watching and several other videos and I will put links to the description and they should pop up in the top right hand side of the video so whenever you see something pop up that would be me just recommending um a fundamental analysis video that I think you should watch so um let's get into it let's get into the fundamentals and look at the review so just as a basic um understanding and a reminder I guess is that um there are three main um I guess uh macroeconomic uh data points that we should look at when it comes to forex fundamentals and what really kind of moves price at least over the medium to long term and they are gross domestic product and inflation and um those two will have an effect on interest rates and what the central bank does with interest rates and so um looking at GDP first typically um when you have gross domestic products and uh growing and expanding and a boom in the booming cycle of the economic cycle uh it typically leads to currency appreciation if you have growth and if you have contraction then you know into leading into some sort of recessional bust slump phase of the uh of the economic cycle that typically leads to currency devaluation or depreciation right and so um looking at inflation inflation central banks have a two percent target and a mandate they are mandated to get inflation to the two percent target now um two percent inflation is actually an acceptable currency devaluation it's seen as you know again acceptable where it's not too hot not too cold um the goldilocks kind of the um economy of inflation if you get the reference um whereas if inflation goes above the two percent then actually that is seen as unacceptable currency devaluation so inflation rising is actually currency devaluation and in fact this should say and i should have put this one below two percent yeah put that now um inflation right if inflation is below two percent and maybe trending away from um the two percent target so it's going to maybe one or zero and then it goes into the minus in fact that is unacceptable currency appreciation so if inflation goes towards the negative towards zero then in fact the currency is appreciating right now um depending on what is going on with GDP and inflation will determine um a central banks decision on what they will do with uh interest rates and uh there's the interest rate cycle and pretty much interest rates um do go in cycles and so um inflation inflation is above two percent right central banks will typically tend to hike right and that leads to currency appreciation because what they want to do is actually counter yeah currency devaluation so as you said if inflation is above the two percent and trending away then that is unacceptable currency devaluation and to counter that right they need to hike rates so that um and hiking rates has the effect of appreciating you know creating demand for the currency which create a currency appreciation to kind of stem um a currency devaluation caused by inflation now if the central bank is on um on hold then currencies um the currency uh they accept the currency value yeah so they're they're they think to themselves that yeah we like the currency at this value yeah and the inflation if inflation is below the two percent then in fact they will typically tend to cut interest rates and cutting interest rates it has the effect or can have the effect of depreciating a currency because if inflation is below two percent that is unacceptable currency appreciation and so again to counter the appreciation um of a currency they have to cut rates to try to depreciate the currency so that they can stop the currency appreciating too much and also as well it's well worth noting that the uh if you if the central banks hike too much this will cause economic contraction i'm not going to get into that in this video but again i have um a video um explaining that which i will uh put in the top right hand side of the of this video so click on that maybe afterwards when you come back and maybe review this video and so buy the rumor sell the fact buying the rumor is what we do um as fundamental traders and having a fundamental approach because that's where the money is made um you know it doesn't it's secondary whether the actual fact comes to pass right but the money is made in buying the rumor that is um you know we need to get ahead of the curve and so um that is really what the point is if we fundamental analysis it's getting ahead of everybody else trying to get ahead of um of uh of these technical traders you have no idea what's going on and you know buying at bargain prices and looking where something is expensive um as well as a bargain they're a cheap or a discount and understanding that when things are changing in the future then in fact currently this you know whatever price of a you know the exchange rate is of a currency pair in fact that is probably cheap or it might be expensive again depending on what happens with you know gross domestic product inflation and interest rates so it's all about buying the rumor the fact whether it comes true or not is secondary and so let's look at central bank policy differentials because that's what we're ultimately trading in in currency lands in euro dollar obviously the the most traded currency in forex and so um when we're looking at GDP inflation and interest rates we're comparing those um you know europe's um data with the us data and seeing where the differentials are yeah so um if uh one central bank for example is hawkish right very hawkish hawkish meaning that they are likely to hike interest rates compared to a currency that is not as hawkish or maybe a bit dovish which means that they may want to either hold or cut rates then there's a differential there right because we know that hiking interest rates appreciates a currency cutting rates devalues the currencies so the biggest kind of divergence you can get is when one current one central bank is hiking rates and another is cutting but that doesn't necessarily happen all the time in every day but you know what we're looking for is differences or as as to why one central bank um is likely to be a bit more aggressive in you know their hiking of rates currently um compared to for example another or why one central bank is likely to for example um continue hiking um um uh and leading their hiking in terms of the other central bank safe central bank b is likely to hold first kind of like a leading and lagging um uh dynamic but we'll get into that maybe another video anyways let's look at the differences between the euro and the dollar in january february and march and so what was happening in europe in january so euro according to uh to boomberg and an article in boomberg um traders were wagering that the ecb will raise rates by another thought of 140 basis points yeah the euro's gains also reflect a certain of optimism over europe's economic outlook given lower gas prices in china's reopening which is seen as a boon for the trader to give us a bit of context what was happening was in in november december um it was expected that the europe would go into a recession because um of higher gas prices this is due to the ukraine um and russia tensions and the war that was going on and so uh europe were expected to go into a recession but due to a um some really warm weather um and natural gas prices actually coming down it helped the economy and so the economy actually didn't go into a recession and actually um avoided a recession it started to grow a little bit and although inflation uh you know was high it helped the um central bank by uh them actually being able to high crates because if they went into a recession then hiking rates in the recession actually makes things a lot worse and so um yeah inflation although it was rising the europe had a bit of a um dodged a bit of a bullet in terms of avoiding a recession and so the traders right were placing bets that in fact with rising inflation and a decent economy that the you know europe were able to hike a lot more so about 140 basis points whereas in the us at the time this is from the same article only around 60 basis points of further fed tightening right tightening meaning hiking is priced for the rest of 2023 so you can see that the european central bank was being seen as being more hawk way more hawkish uh than the federal reserve where right so markets are now leaning towards a 25 basis point high rate height right sorry rate rise from the fed come february the smallest in nearly a year and so again you can see the hawkishness between the two the european central bank was seen as being way more hawkish and the fed actually were seeing as uh again less hawkish a slightly dovish so what happened on the charts in january let's look at january and so this is from the beginning of 2023 at the beginning and we can look at you know until february the first and again what was expected you know happened so um in our private mentoring group this called group you know we've been long and i've said i've been long since the end of december um you know right at the beginning of january somewhere around there and we had a long bias on the euro dollar or getting on the long on the euro and so um you know this is basically is you know what played out and so many of the traders will attest to this mainly made a decent amount and so yeah for the whole of january had a long bias right getting in long on that euro dollar and that's pretty much what played out so let's go to um february euro dollar so europe european central bank may need to deliver another half point interest rate increase after a planned hike of that size and next month's meeting according to the governor council member class not and so um i think in february they did hike by 50 basis points and the uh the consensus was that they probably may need another um 50 basis point hike in order to try to combat inflation but there was a shift in fact with the federal reserve right whereas um well in this month we had the federal reserve officials uh could shed light on how many policymakers saw the case for a larger interest rate increase at their last meeting whether they anticipated the need to take rates higher than previously thought contained persistently high inflation and so remember the previous month we saw that the market was expecting probably around about 60 basis points for for the rest of 2023 what had happened was is that inflation was um was a bit sticky and so persistently high and so to get again inflation down you know the uh the market kind of changed its view or slightly amended its view to think that or the federal reserve did as well um was that the rumor was was that they may actually hike more than expected yeah and so with that being said the market had to price that in so although the euro was still hawkish in fact there was a you know a much more hawkish sentiment to the dollar right which then should mean that the um the dollar would have to be revalued and appreciate a bit more against the dollar right because that there was a change in sentiment and if you go to february so february 1st to march the 1st this is basically what you saw right you saw prices start to you know make lower highs lower lows as the rumor of a 50 basis point hike was coming into play yeah and again it was a rumor because it actually did not happen so um i think they had by 25 basis points but the rumor was that they may hike more than expected and so that had to price in um to the market whereas the month before they were seen as maybe being a bit dovish yeah so that is pretty much what had happened during the charts on february now into march so euro um money markets uh money markets traders briefly priced in a four percent ecb terminal rate in the wake of the releases which would exceed the peak in borrowing costs um at the turn of the century that compared to a 3.5 percent expected earlier this year with traders now betting the ecb will keep raising rates through february 2024 and so in fact that was very very hawkish for the euro and the market uh was expecting even more rate hikes than they had previously expected sorry the month before and so again just similar to what happened with the us um in february where there was a bit of a change in hawkishness in fact money markets had priced in an higher um uh terminal interest rate and so you know from from 24 from 3.5 percent and so that was quite hawkish for the euro whereas in europe the statement is it says now we are starting to fill those long and variable lags with uh sorry with which monetary policy works bellarina uh uruchi chief u.s economist at t-roll price socios told bloomberg television on friday the first sign of that is i think what we are seeing with silicone valley bank here lots of businesses and banks we are going to find this year aren't able to operate at these higher interest rates so again to give this a bit more context um we all know what we should know all about you know silicone valley bank collapsing and other banks think silver as a silver gate bank or something like that um and there were banks in the us that were uh failing and this was brought on by higher interest rates and so um well one of the factors was high interest rates so let's go back to when i pretty much was talking about hiking too much causes economic contraction so um borrowing and lending costs were obviously affecting um the banks as it was going higher as the federal reserve were hiking and that was one of the effects of um of hiking interest rates on the economy and on you know companies and banks and so the sentiment really was that how can the federal reserve continue to be very hawkish and continue to hike if there may be more banks in problems and yes there were european banks you know that were in problems i think it was deuter bank um had a bit of a bailing out as well uh but it was seen that the us banks were in a lot more problems than european banks and so um when you have you know a bit of a credit crunch and a credit crisis where um the us is most affected it means that if you know there's a credit crunch that would mean a contraction in the economy and a contraction in the economy may mean obviously a recession sooner rather than later and again hiking in that environment is not prudent because if you keep hiking you're going to um exacerbate the um uh the uh potential for a um a recession right you're bringing the recession closer to you and so the you know europe while they had you know the uh of quite a hawkish bias um which did you know later change to be a bit more cautious as well alongside the federal reserve there was still a hawkishness or there were still and still are more hawkish than the um federal reserve currently in terms of interest rate hikes so what happened during uh march and this played out again a more hawkish european central bank there was a bit of a bit of a wobble but ultimately we ended up going higher and in fact sorry i haven't actually um should actually uh cancel this one sec sorry right so here we are we used to do year to date yeah so here we are in march yep so from here to here in march we had prices really kind of move around 400 pips from the low nice buying opportunities at these lows before prices went to the upside in march and so um you know we're seeing the the divergence between both central banks again play out into april and into mayors nothing's really changed uh per se the european central bank are still more hawkish than the federal reserve and are expected to hike more than the federal reserve and you're seeing obviously prices drift higher and so with that doing a bit of a fundamental review it's looking at the actual data looking at gdp we can see that um the us is are the blue uh columns and you've got the european growth rate as represented by the dots and so we can see that from january into april we've seen a slight you know decline in terms of gdp growth rate for the us but in fact in europe we had um we've had a bit of a bit of growth right prices have gone to the upside um yeah the number is lower um in terms of growth rate but remember that the european central bank was supposed to go into a recession and the fact that they avoided recession took negative quarters of growth right they avoided that and so that was seen as an absolute positive for uh europe yeah so we've had a bit of a divergence there where we had one central um one economy uh you know contracting and one actually you know growing although be it you know quite slightly and then we've got inflation rate and so the us inflation rate again has come down to around five percent uh on here on this axis on the on the right hand side we've got the european inflation which is actually around seven percent and you can see it slightly ticked up as well the latest um inflation data so uh with that being said let me go back so um inflation obviously for the us is coming down whereas although it's come down recently for the for the european central bank it's a a lot higher than the us and b it's um on the upturn slightly so it looks like again the european central bank are likely to be a lot more hawkish than the um than the us and we can see what's happened with interest rates since the beginning of the year and you can see in february um the european central bank hiked by 50 basis points whereas the um the federal reserve actually hiked by 25 basis points and then you had another 50 basis point hike by the european central bank and then you had only a 25 basis point hike um from march into into april right and so whereas the european central bank has hiked by one percent or 100 basis points the federal reserve only hiked by 50 basis points or 0.5 percent so again very hawkish from the european central bank and so again seeing that on price it's no wonder you're seeing you know prices grind you know a lot you know higher and um towards the end of the year um what's expected is that the european uh the euro of dollars should reach at least 115 so let's see if that actually comes to play and comes out comes to fruition right anyways just some notes uh it's things you must be aware of so data must support the narrative you must you know have um the data support your trade idea now we're dealing with trade probabilities right there are no certainties and no one has a crystal ball and so when you've developed a trade idea and you've got a trade idea um you can continue to kind of hold the trade or have that you know bias if for example um let's say the european central bank hiking race they want to hike rates and let's say the data supporting that narrative would be a continued you know in rising inflation and supporting that may be a decent economy right economy still growing that that that data will support the the european central bank hiking right now if the if europe are going to go into a deep recession then it's going to be difficult for the european central bank to hike in that environment and so you know it's you can't start to say all right and well i'm just going to start you know buying the european central bank if the data doesn't support the narrative inflation starts coming down then then although yes in this day currently today you know the european central bank are more hawkish than the um then the federal reserve that can change if inflation starts to drop like a stone then the european central bank are going to say well what's the point in hiking if inflation is coming down naturally and normally there's no need to hike and so um data must support the trade idea narrative yeah and there are again no probabilities no certainties in trading um so then the probabilities we deal with the probabilities and there are no certainties in trading and think bigger picture so um there's lots of data points that can get you confused and distracted the best thing is to think about the bigger picture observe the higher time frames and look at the daily and weekly time frames uh try not to get drawn into every single lower time frame every five minute you know support or supply zone or trade setup because you can have situations where you might get a pullback right now um in in march you had a you had a nice move from this height to when it's low to this height right now there's there was a pullback of around 200 pips yeah let's pull this pullback on the daily was around 200 pips something like that from that height to that low 217 pips and so if you were to zoom in on this on to like you know some sort of 15 or five minute chart a lot of traders will try to you know we'll say oh well you know what Leon said that um you know i should be bullish i've done my fundamental analysis and i want to be bullish on this you know this currency pair now yes you're making the right choice in terms of being you know your directional bias but ultimately you still have to understand that um there's there's value right you're buying at highs don't buy at highs if this is a move that has gone you know several hundred pips from this level to this height in fact what you should be doing is looking for discounts yeah discounts and one of the discounts i look for is fair value and um so if you go back to if i go back to the day time for any chart uh between this high and this low yeah 50 percent of that would represent fair value so what happened was is that you can see here that price came down to fair value right and that was really the area that you probably now want to start to look for a trade sell if you're looking for every five minute 10 minute trade sell you could be right about your direction but because you're buying at highs and the you know the institutions want to buy the discounts pullbacks you know 200 pips might seem like a a trend on a on a five minute time frame but it's really just a pullback and if you understand the fundamental bias just really kind of zoom out and look at where you are in context of you know where expensive is where cheap is and don't fomo in at highs right don't fomo in in these areas wait for the pullback wait for a decent price pullback fair value and then look for potential uh loan trades right um and that's not necessarily me telling you you know a strategy or anything like that but just giving you the context of um of why you should kind of zoom out and look at the the higher time frame the bigger time frames and give yourself a bit of context and once prices pull back into a nice you know zone and maybe support resistance or supplies you know a demand zone that you want to look to get involved in then maybe go down into the lower time frame start to look for cement trees or whatever your your setup may be um yeah so look at daily weekly time frames for context uh directional bias really doesn't change too often and so um you know i've been long on the euro pretty much now since the beginning of the year as i mentioned before and so that's what i'm releasing this in i'm recording this actually in in may so um it's been five months since i've been long on the euro and it hasn't really changed at all actually it hasn't changed at all and so directional bias once you get a good trade idea doesn't necessarily change from week to week some traders will say oh well what am i gonna be going long this week or short this week um if you have a good trade idea um you know you can be in a trade for months and again i've uh created a video um i think it was like maybe a couple years ago a few years ago where i was detailing how i was short on the euro dollar for um for a whole year in fact i was short for over a year but i just made a video similar to this where i detail month to month um you know my euro dollar short trades um the my bias and the reasons why and i'll get i'll put that in the uh the link in the uh top right hand side and so directional bias doesn't change too often it's not a week to week thing you can have a directional bias for a good few months um if not longer um once you once the data does support that narrative and um yeah that's pretty much it so um if you're still around watching this video thank you for watching to the end and also as well um for the next video i thought i'd put it out there um if you've got uh you know for the second quarter uh video i'll do these every quarter so if you want me to analyze a pair um just suggest it in the um in the chat below if you're watching this on youtube and the pair with the most you know likes or um the most suggested pair i'll do a similar analysis to this video or the same analysis to this video on that currency pair so it could be pound dollar it could be pound yen it could be ozikad you know just whatever you want but again the most popular um pair the most suggested pair i will do a second quarter analysis on that for you guys and uh yeah finally there is mentoring available you know we can get access to the private discord community where you can take your fundamental analysis uh really to the next level and go to trading180.com i don't really have um the mentoring open 24 seven i do have periods where um i have mentoring as i like to keep the group uh small and um really kind of focus on smaller groups and so uh whenever the next opening is it'll be um on the website for you to uh to join then so uh guys take care i hope you enjoyed the video suggest um a pair that you want me to look back on and give you uh the analysis on and uh again the most uh recommended uh pair is what i would do anyways guys take care all the best speak to you soon