 Hi, my name's Leon Rowe, currency trader and trading coach at Trading180.com and welcome to this week's supply and demand forex and gold fundamental and technical analysis. If you're new and you watch it to this channel, a warm welcome to you. And if you're returning welcome back and an equally warm welcome to you. And if you like the weekly analysis that I've provided, please don't forget to like, subscribe and share with your fellow colleagues as a free way to kind of support the channel and gets the quality content out to those that need it. And before we get into our fundamental and technical analysis, just thought I'd go over a bit of education, fundamental education as fundamentals is really what drives valuation of of anything really, not just currencies, but it's understanding what creates demand and supply right in the currency. It's not going to be technical analysis. I can tell you that banks don't just look at technical analysis. They look at the fundamentals behind what gives an asset class its value, right? That's really what fundamentals and analysis is about. But in this question, in this poll that I asked about a month ago, I said, if a central bank is hiking rates, the demand for that currency should typically increase over the medium to long term. Is that true or false? 91% of you said true and those 91% who voted true are correct. The reason why, again, going back to fundamentals is because interest rates, you know, are the cost of it can be used depending on what side you're on, whether you're a lender or a borrower, but in in currency land, interest rates are, you know, your return on investment, right? They're your yield. And as an investor, right? You want assets to generate you high yields. And if, you know, you're holding, for example, US dollars or British pounds and the interest rate is, for example, 2%, it means that for holding that currency, you should be getting paid a 2% return. And currency trading forex trading is all about really the comparison between one currency and another. So when a current, when a central bank is hiking rates, which is the smart money, right, they control, they're trying to control the valuation of a currency when a central bank looks to hike rates, right? From, let's say, for example, you know, 0.25, potentially to 0.5%. Yeah, to 0.5. Yeah, what they're actually doing is appreciating the currency. They want the currency to get more valued, right? They want it to get a bit more expensive because what that does is it creates demand because if one country is, for example, like I said before, is, let's say, for example, there is 0%, so they're not getting any kind of interest for holding that currency. And there's another currency and country and central bank that is raising and first of all, they've got a higher interest rate. But then they're also hiking their interest rates. Why am I going to hold a currency that has, you know, that has not given me a return, right? Well, to say it's not absolute, there's obviously reasons for holding a currency that has, you know, 0% depending on the environment. But to simply explain, it creates demand, right? For that currency, because again, investors want a return. If they think that their return for holding a currency is going to go higher in the medium to long term, then that's going to create demand. Every, you know, investor is going to pile into that currency and it should, you know, typically increase over the medium to long term. And the reason why I say medium to long term is because in the short term, price action is very, can be very random, right? And this is due to things like liquidity and slippage, right? Which the banks can't trade like how we trade. They have to avoid slippage and they have to accumulate a lot more, right? And because of these things, in the short term, price action can seem very random, but in the medium to long term, you will see the direction that was intended by the banks and the investment banks, et cetera. So for those of you who've got it right, well done, pretty easy question. For those of you who didn't, I guess it's your first time to, you know, with the fundamentals and I hope that you did learn something there. Moving on to before we end to get into the fundamentals and the weekly analysis, just our approach to trading 180 is really to establish fundamental analysis and all which basically determines our direction and then apply technical analysis to supply and demand strategies to time our trade entries, establish profit targets and overall risk management. And we sit basically right in the middle here using the best of both worlds to make the best trading decisions. So moving on to this week's week ahead, tradingeconomics.com and the Federal Reserve and Reserve Bank of Australia will be releasing policy meetings, meeting minutes in the coming week while central banks in China, New Zealand and Indonesia will meet to set interest rates. So that's going to be important, especially for the New Zealand dollar. They're expected to hike rates this week, if not this or this in the coming week. But if they don't, then again, they will be the ones, probably one of the first ones to hike interest rates. So that's just giving you, they're telling you what they potentially are going to do. So what should you do? Get not financial advice, but where is the probability of the New Zealand dollar potentially going higher in the medium to long term? Again, in the short term, nobody necessarily knows, but medium to long term, you should see the New Zealand dollar go appreciate. On the economic data front, important releases to follow include US and China, retail sales and industrial production, Canada and UK inflation data. That's going to be important because inflation data will determine is one of the factors that bankers look at in order to potentially hike rates or not, right? And retail trade, Japan and Eurozone, second quarter GDP updates and Australia employment figure. So there's definitely some a lot of a market moving data and important decisions to be made about monetary policy for the central banks, depending on what happens with the data. Anyways, moving on to the US dollar DXY dollar index and the dollar index. Last week, we did come up to this, this demand zone, right? And, you know, we did actually, you know, sell off a little bit, but that's just probably maybe some sort of pullback could be profit taking, et cetera. The question really is, is understanding why should the the US dollar go higher in the medium to long term? And if they, if the Federal Reserve are continuing to look to hike rates, then you should really just look at any pullbacks as buying opportunities or just looking at demand zones. So if you're looking to go long based off of your fundamental analysis, ignore supply zones, supply zones shouldn't even come into your mind. I know traders do want to, you know, try and make money on the way up and on the way down, but good luck with that, I would say. It's it's I think it's best to just be patient and look for just buying opportunities if you understand where the path of least resistance is. Yeah. But anyways, getting into the decision as far as the the decision for the Fed to start tapering and tapering should again increase the the valuation of the currency because I explained it last week in last week's videos, I have a look there. But just I guess to summarize is that quantitative easing devalues the currency and by tapering quantitative easing, you should, you know, minimize the impact of your devaluation, right? So Delta variant won't impact Fed's taper plan. Blinder tells Gigi, right? So the Federal Reserve will likely lift its zero interest rate policy next year as the impact of the fast spreading Delta variant has not been that significant on the economy. Alan Blinder, a former Fed vice chair, told Japanese wire services, Gigi press. So that's, you know, that's quite important. Again, it is his opinion, but he is also the the ex Fed vice chair. So he knows pretty much what he's talking about. And so so really, truly, you should understand that if that's the view, right? Again, nobody knows 100 percent. It's just a probabilistic game. But if that is the is the view, right, that that the variant isn't necessarily going to impact or it may do. But the chances are it's unlikely to, depending on obviously the impact of it or the spread of it. But you should really look to continue to potentially buy the dollar. Again, not financial advice, even though in the backdrop, we do have some risk events, and this was on the 12th. Things was Friday. So China's port shut down raises fears of closures worldwide. So isn't that a headline risk off? Meaning that there's a lot of fear, uncertainty and doubt in the world. And in fact, the dollar can still can still benefit and does benefit from is a risk off currency, right? So meaning that it can benefit in times of risk off and on, right? So it's where is there are other currencies that generally don't do well in a risk off environment. So basically, the story is a COVID outbreak that has partially shut down one of the world's busiest container ports is heightening concerns that a rapid spread of the Delta variant will lead to a repeat of last year's shipping nightmare. So if this does start to come true, then we could see a bit of a sell off in commodity currencies like the Australian dollar, the New Zealand dollar, the Canadian dollar, for example. No one really knows how the US dollar will react. But against the commodity currencies, you probably will see the dollar start to start to strengthen against currencies like the yen, which we'll get into in a sec. You know, it may start to sell off, but the dollar index basically is just used as a again, an overall snapshot of the dollar strength against various other currencies like the euro, the yen, the pound. And so you're just looking at this is comprehensive prices come down into this demand zone, and they start to be some positive price action. And you think that that's really a great place to look to buy. Then look for the same kind of confluence on other currency pairs. If you're looking to buy the dollar, the same thing, if you're looking to sell the dollar, waiting for basically pullbacks into an area of supply, which would probably be here now. And that ninety two point eight eight level before looking at getting short to use a bearish price action there and look for, you know, sell dollar trades on any of the dollar crosses. Moving on to the dollar yen. In the dollar yen again, we've seen a bit of a sell off on the Friday. And again, I think this could be simply because of the story of the of China's busiest port shutting down, right? But with risk off, right, risk off with fear, uncertainty and doubt, the Japanese yen is considered a safe haven currency and money will flow into that currency. But I tell the traders in my private mentoring room is that depending on the risk sentiment and what the event actually is, the risk risk off sentiment drives prices to where we would want to be a buyer. Right. Because let's say, for example, the in the next couple of days, they get a grip on the delta, the variant outbreak. Yeah. So they, you know, they quarantine and and price still still coming down, right? And then they start to say, OK, we're going to reopen the ports. Now the dollar looks like an absolute bargain against the Japanese yen at these prices because the reopening of the ports will mean more risk on. Yeah, we mean more risk on and in a risk on environment, you do not want to be buying the Japanese yen. You want to buy the higher yielding currency, right? So that's pretty much how it works. A risk off can drive prices to where we want to be buyers and then look for buying opportunities when risk comes back on. So for now, that's really the plan. And let's see on Monday, whether, you know, the market is kind of scared out and really kind of getting into into risk off mode and how how the impact of really the China's port shut down will have on the market and how long it may last for. Again, nobody knows for sure. But let's just keep our finger on the pulse dollar Swiss. Again, similar thing I think is happening across the board where you're getting a bit of a sell-off on the Friday, right? So that's supply. So again, if you are thinking to yourself, well, I want to try and take advantage of risk off and you're looking for pullbacks into that zone there. You're looking for risk on trade. I think the nearest demand zone is going to be all the way down to this 90s area. But also as well, you have to think to yourself, if if prices do make higher highs, then that becomes a nice demand zone. And then that could be a really nice buying opportunity. But let's let's see at the moment, not really much to kind of say about this. Pretty similar to the dollar yen moving on to the dollar CAD. Dollar CAD, two kind of strong currencies going out. And again, I said last week that when you have two strong currencies that are potentially looking to hike rates, you'll generally get a ranging market. And so this is pretty much what's happened. Price is kind of caught between this high, this demand zone and this supply zone. So I think for me, it's not really again, a pair that I'm interested in. If I'm getting long or short, it would have to be really up into this zone here, this 127, 128 to get short. Or if I'm getting long, probably prefer the bottom end of this, this demand zone, if not down into that zone, but it's not really a pair. I'm looking to trade as the CAD for me. They want an interest in hiking cycle. There is obviously an opportunity, depending on risk of sentiment, because in the risk of environment, the CAD shouldn't do well against the dollar. So in fact, what you should see is is more upside, is more as more upside on this currency pair if risk off comes into play. New Zealand dollar, US dollar. Again, surprisingly, that we have a bullish day, but with dollar potentially setting off and also as well, the rumor that there is an interest rate hike coming this week on the New Zealand dollar. We we potentially should have prices go higher, but this could be capped due to the risk of sentiment. But for me, any pullbacks on that New Zealand dollar, I think is great, a great buying opportunity, not necessarily against the dollar per se. But I just think that the US dollar, so the New Zealand dollar is really the one to buy for the foreseeable future. And this is really due to them being really the first to start looking to hike interest rates and being on that cycle. Because once they won the interest rate hiking cycle, it can last for a number of years, so they're ahead of the curve, they're ahead of pretty much all, you know, banks that we and currencies that we trade. So so yeah, let's see what happens here. A bit of no man's land when you think about where we are, if you're looking to buy and we're in that range between the high and that low, then and you're looking to buy the the sorry, the New Zealand dollar, then we're in a bit of an expensive area. Any pullbacks again down into these nine zero point six nine areas would be really nice for a potential buy. And again, if you do want to get short, probably look for a short around this area here as a fresh area of supply. Pound dollar, it's a pound dollar. A few weeks ago, we did bounce off of this supply zone, really nice. And let's just pull this down. I think, yeah, we've got that area there. Again, two really kind of strong currencies going at it when it comes to currency appreciation, looking at the the pound this week. So UK growth surges, but can it last? So the spread of a delta variant has put the brakes on the recovery after a strong second quarter, while we're not expecting a return to significantly negative growth. The rise in COVID-19 suggests it may be still another couple of quarters before the economy has returned to its pre virus level. And this is from ING. So there was some really good data coming out or that came out for the for the pound. But let's see what happens. I mean, I'm probably a bit more bullish on the pound now. Again, not necessarily against the US dollar, but if you do get maybe a pullback into these areas here, say this one three seven area, that's actually a decent area to look for any kind of long trades, if you think that the dollar should want to get stronger than any pullbacks into that zone would be a decent short trade for the for the US in buying the US dollar. But again, if you're looking at strength and divergences, meaning buying one currency that's strong, one currency that's weak, which is what you should be doing, there really is for me no real divergence on this currency pair. Meaning that I'm not really looking to get involved in that. Euro dollar, your dollars come down to a really nice demand zone and pretty much bounced off it, pinged off the absolute low of that and is making potential highs. And again, I honestly think that from a divergence perspective, the divergence is with the euro dollar. So, for example, tapering talk with the US dollar. And the in Europe are really kind of lagging behind when it comes to monetary policy. So ECB's wide men warns inflation may pick up faster than expected. So European Central Bank governing council member Jens Weidman warned that inflation in the euro area could pick up faster than expected and urged not to drag out the institution's pandemic bond buying program. The problem is, though, is that there's still really kind of below their 2 percent target. So the ECB expectation to average at one point nine in twenty twenty one, mainly reflecting temporary factors before falling to one point five or one point four in twenty twenty two twenty twenty three. So while underlying price pressures should strengthen the economy as the economy recovers, the current outlook forces inflation well below the ECB goals, ECB's goal of two percent. Meaning that regardless of what this guy is, Mr. Weidman is saying, if you're not really central banks aren't necessarily above their two percent target, then what is the the incentive to high crates? Right. They just they're just reaching their goal. So with that being said, the euro, the ECB are lagging behind, whereas the US are really kind of talking about tapering and potentially hiking interest rates. Right. So any pullbacks, any pullback into supply zones will be really kind of nice selling opportunities or buying for the US dollar, although there is obviously an opportunity to get long on buying the euro in the short term. But really, I think the power for these resistance is still to the downside. And if that level doesn't work out, then that would actually still be a decent zone, a decent short trade from this one nineteen to six area would be probably the best. You should probably from there. Yes, so from the three one area would be the better zone to look for any kind of short trades moving on to the euro yen, euro yen, not really interested in this. Again, from a risk off perspective, you should expect the Japanese yen to strengthen and continue going to the downside, especially against the euro. But I think if the euro does in September, October, does start to act a bit more hawkish, then that's going to be a really nice buy around this one, two, eight, fifty area. But as a currency pair trading perspective, I'm not really too interested in this currency at the moment. There is a nice little supply zone there or supply zone there. So just look for any kind of sell trades. But sell trades would come into understanding that you want to sell this currency pair, get short in a risk off environment. Aussie dollar, Aussie dollar. Again, being in this range, really tight range, prices really kind of remained between this, probably maybe moved to about a hundred pips or so, something like that within this hundred pipped range. Yeah, 110 pipped range for quite a while. Matter of fact, since really kind of July the 22nd and we're literally August 13th, so really kind of low summer volatility trading. If you do want to get long, I think the Australian dollar is lagging behind slightly there. They've got an outbreak of the Delta variant and the major cities going into lockdown. So if that continues, you should really expect prices to go lower. So any pullbacks into any kind of supply zones and you've got you've got a decent supply zone right here as well. That would be a decent sell trade if prices come up to really kind of up the highs of that area and looking for short trades. And remember that the US dollar can benefit from a risk off environment. If not, then you're looking at this area here as for short trades. But I think once the Australian economy gets going, then I think this area actually can be a really nice buy because I do think that the Australian dollar in a risk on environment should kind of outperform with higher commodity prices. Moving on to the Aussie yen, Aussie yen, again, we've had a bit of a sell off. See the analysis from last week. Understanding that we got support there, bit of support there as prices went to the upside, then came down in resistance. And then I was saying last week that if you are looking for any kind of sell trades, then that would be the zone and you can see pretty much what happened there again and risk off has aided that. So risk off sentiment. You should really want to look to buy the Japanese yen in the short term if you're looking to take advantage of risk off. And so, yeah, we've seen that trade kind of work out. Again, for me, though, I'm more of a risk on person. So prices, if prices do come down to this 80 area or just below that area for me and risk on comes back into play, then I think that's going to be a brilliant buy for the Australian dollar. So for the year, I think now I think I'm I'll be interested in that. But I've got to see the data support, the narrative meaning that I want to see the Australian dollar start to really, you know, jobs, employment, GDP, really start to be on the up and up before I start to look to buy the Australian dollar. And finally, gold, gold had a massive rally, I think, on the quite early in the week on August the night. So again, it pinged right off of this demand zone demand here, demand here. And then we literally have come off that move the good couple of hundred dollars from in regards to gold. So that and that should not be there. We do have the I'm going to keep the demand zone there. And we're pretty much in between a high and a low, right? Meaning that if this is an expensive area for gold and that's a bargain area for gold, so it's higher would be expensive. This low would be known as, I guess, a bargain area. We know that to be a bargain because what did price do when it came down there? It literally bounced off as a whole load of buyers around here. In between that is fair value. So if you're looking to buy gold, you're really looking for some sort of pullback before looking at getting long. If you're looking to short gold, potentially with a hawkish federal reserve, you could see prices come up this week and then look for, you know, a potential sell off. And again, just looking at gold. On the 12th, it said gold heads for its second weekly loss as traders assess the dollar. I think I think this is a bit maybe out of sync on the 12th, but it says gold is heading for its second straight weekly loss as the dollar advances concerns Simmer that the federal reserve could soon support, reduce support for the US economy. So the dollar advanced on Thursday, rising inflation pressures and strengthening job market. A strong dollar diminishes demand for bullion as an alternative asset. So this actually this this price actually could actually be due to more risk off sentiment coming into the market. Gold is a safe haven. So even though the dollar could be strengthening, you could because of risk off, you could obviously see money going into gold again. So maybe this is being driven by more risk off sentiment rather than dollar weakness. But either way, you look at it. If you're looking to potentially sell gold, meaning you're buying the dollar, this is a way of doing it. If you don't want to necessarily buy the dollar, you want to sell gold looking for, you know, really a play back up to this supplies and before getting short, if you're looking to sell the dollar and buy gold, then you're looking for really kind of pullbacks into a zone. I probably say this 1703 area again before looking at any kind of long trades. Anyways, guys, that's it for this week. Hope you enjoyed it and found it useful. Please don't forget to like, subscribe and share and I'll speak to you guys soon. Have a great trading week.