 Hi, my name is Leon Roe, 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 or warm welcome to you And if you're returning an equally warm welcome to you and if you enjoy and find the content I provide useful every week, please don't forget to like subscribe and share It's a free way to really support the channel and gets the quality content out to you know The traders that that really need this kind of information where we combine fundamentals and Technicals to make the best trading decisions. So before we get into the nitty-gritty I just wanted to really answer and go over this poll that I about a month ago and The question is what does a dovish central bank want to do with the valuation of the currency and 24% of people said make currency appreciate and 76% said make the currency depreciate and the 76% of you out there who voted for that Make the currency depreciate are absolutely correct And this is really important a lot of traders generally will not really understand why they should know this stuff And this stuff is a when I say this stuff I mean fundamental analysis because in the medium to long term. This is what drives the value of a currency now a dovish central bank will want the valuation of The currency to depreciate. Why is that the reason why that is is because Sorry for go to the next slide right Actually matter of fact first of all before we get into what why there is hawkish Let's let's get into what hawkish and dovish actually is so hawkish policy makers tend to focus on controlling inflation As a primary goal of monetary policy monetary policy meaning whether they're hiking holding or cutting interest rates dovish policies are more concerned with promoting economic growth and job creation So hawks and doves both use interest rates to achieve their policy goals So a hawk or so a dovish If the central bank is dovish on policies They're more concerned with promoting economic growth and what they need to do is actually when they're promoting economic growth Is make the the the value of the currency d value right and depreciate They don't want an expensive currency. Yeah, you do not want an expensive currency in In a recession when you're promoting trying to promote economic growth right and job creation In fact you want a cheaper currency. So a dovish Central bank yeah is concerned with depreciating the currency as we go back to the 72 right they make the the concerned about making the currency Depreciate yeah, they don't want the currency to appreciate because an appreciating currency is not Advantages when promoting economic growth. Yeah anyways, let's get on to what we usually do and what we're here for which is Understanding the fundamentals in the way that we trade the trading 180 and fundamental analysis we use to establish directional bias and Applying the technical analysis strategies like supply and demand for To time trade entries established profit targets and risk management. So this week In the week ahead and zoom in a little bit All eyes turn to the US employment report next week, which is going to be very important Which will probably add to signs of a continued labor market recovery as well as worldwide Manufacturing and services PMI service Survey, sorry and second quarter GDP updates for Canada, Brazil, Australia And Switzerland is what we're concerned with so Canada, Australia and Switzerland in the pairs that we are some of the pairs That we look at elsewhere key data to watch for include US factory orders and construction spending eurozone inflation That's going to be important and business morale Germany retail sales Japan industrial production and consumer confidence and Australia and in the foreign trade figures So lots to watch out for even though We do have a bank holiday here in the UK the markets are put to be quiet But I think towards the end of the week the main Data really to watch is US employment and we'll get into I guess the Jackson hold in the sec but It's really important for the US to look to potentially they're looking to taper and high crates that employment Yeah continues to grow, but we'll get into that as we look at the charts anyways guys Let's get into in fact the technicals in looking at the dollar index and the dollar index So so this week from a technical analysis perspective We've you know, we're basically on a bit of a pullback You think about when you see What we've been doing since you know may been on this, you know higher highs higher lows being made Right, and we're basically on a pullback, right? So the question is is is Where will prices go, you know in in the medium to long term in the short term? Prices can be very random and this is due to banks accumulating liquidity hunts And trying to avoid really slippage right but in the medium to long term We should want to see a higher dollar if the data supports the narrative So the data as far as positive economic data will pressure the Federal reserve to want to actually look to taper and tapering which is reducing bond purchases is positive for a currency So you should again see prices go higher if the data supports the narrative if jobs Confirmed that the economy is growing. So let's look at what happened this week so that all eyes were on Jackson Hole and Powell says taper could start in 2021 so this year with no rush on rate hike So reduction Sorry reductions Not intended to signal as a signal. Sorry on rate hike He says and Fed chair speaks Friday on virtual Jackson Hole symposium. So the Federal Reserve Chair Jerome Powell said the central bank could begin to reduce or begin reducing its monthly Bond purchases this year though. It won't be in a hurry to begin raising rates thereafter. Yes So basically the the economy has now met the test of substantial further Progress towards the fed's inflation objective that Powell and his colleagues Said would be a precondition for tapering the bond buying while the labor market has also made clear progress Fed chair chief said Friday in a virtual speech to to the Kansas City feds annual Jackson Hole symposium, so Again, the economy they're saying the economy is on the right path and If it continues then what you should see is again a reduction in bond purchases which actually is positive or should be positive for a Currency because that should lead to a rate hike at some point in the future and rate hikes are designed to appreciate With the effect of a rate hike is to appreciate the currency right now Again, none of us know nobody knows what prices are going to do in the short term Yeah, but in the medium to long term you'll start to see prices play out So then you can start to say alright, then I want to be long. Where do you want to be long? Right, is it going to be this level? Yep Does it work out? Nobody knows but if it does then brilliant if it doesn't then you're looking at this demand zone and really demand zones are just areas of potential and past Bargains right because we know for a fact that prices down here at this point on the dollar index Which is a measure of dollar strength against other, you know major currencies like the euro the yen the pound You know made higher highs from here So it was seen as an absolute bargain Now if prices come back down to one of these demand zones Is it going to be seen as another bargain? And if it is and brilliant, you know if you're if you're long now again there is always the The the possibility that jobs comes out as negative, right? And if it comes out as negative what that means is that the tapering for the Fed The Fed tapering probably may be delayed And then the market has to reprice what the dollar is worth if the Fed do not taper this year, right? And that would probably mean more of a sell-off and there's no technical analysis Zones although we use technical analysis to enter and exit trades and to scale in and out Etc. There's no technical analysis That's going to work if you don't get the fundamentals and sentiment, right? This is the reason why we focus on the fundamentals because it gives us an overall direction Path of least resistance and the trend we can identify these trends Which I've been talking about since around here buying the dollar since you can go back to my videos Around this time period here and I've said that we were going to go long on the dollar and this is because at the time Jerome Powell Federal Reserve signaled at tapering right they signaled at tapering here This is the reason for this price action And that's the reason why if you were buying the dollar all you had to really look for is just demand zones Not necessarily on the dollar index, but on other dollar currency crosses But the point being is that we have to understand what's going on fundamentally Yeah, and risk sentiment wise for us to determine the direction of travel and then Decide whether we want to be long at demand zones or short at supply zones Now I will change my bias if for example, you know The data is poor in the in the short term and try to maybe look for supply zones But as long as the data supports the narrative I mean the power for these resistance is to the upside on the dollar anyways looking to the dollar yen and dolly again Again, we're in between really this this demand and supply zone Again that my bias is to the to the upside you can pretty much see what's been happening We did get a bit of a pullback and there is a You know prices have been making higher highs But for me waiting for a bit more of a pullback before looking at getting long if I can this 109 area Probably down to 1 0 8 60 40 area is really ideal For a nice buy if we can come down there If you do want to get short, I would probably say the best area is the 11 starting from maybe the 11 11 11 area to 11 11 60 for a short Trade and again, that's really based off of either dollar weakness based off the expectation of a Rate high core tapering or for example risk off sentiment, you know prevailing and risk of sentiment is The Japanese yen is basically a flat to safety and the Japanese yen will tend to benefit from in a risk off in environment moving on to the dollar Swiss pretty similar to the Dollar yen when it comes to fundamentals you understand that you really want to be buying You know the dollar at the moment again, not financial advice I can always say what I'm doing regardless of what this big scary engulfing candle is saying All this means is that I can buy the dollar for potentially cheaper, right? So there's an opportunity to buy the dollar in and around here My preferred level would definitely be in and around here if You know the dollar and the data still supports the narrative of a Fed taper So for me, these are the two areas that I'm looking at Getting involved in but if again sentiment does change then getting short at supply zones I think this would probably be a bit of a supply zone not the strongest area of supply at the moment, but potentially It could be if it continues to you know fall here Then that would be a decent area of supply before maybe looking at a pullback and then getting short around there But again for me, I'm looking at probably more long trades the long direction dollar CAD Dollar CAD last week did actually set off from here Yeah, but we still do have actually higher highs and higher lows being made right? Higher highs higher lows being made so although we've sold off and there was an opportunity to get short here from a From a fundamental analysis perspective both currencies are seen as tapering So they're both quite strong currencies, right? Looking to appreciate their currencies. So For me not really a pair that I'm looking at but if you are looking to buy the dollar probably say this is going to be the The area to start to look for buying and I do think that if you are looking to sell the dollar and buy the Canadian dollar I think this actually is a really really nice area to look for any kind of short trades I do like that as a as an area to look for short trades Although technically anyway, although fundamentally, I'm not really keen on that pair dollar sorry, New Zealand dollar US dollar and We did bounce off of this demand zone right here really nice and in fact, I think I was saying in the group that that area was actually really nice for a potential Because we had not only demand, but we had an area of support and resistance Institutional level I guess Because that's where they you know are seen trading right the bigger moves on a daily timeframe chart is where You know the institution is definitely are so that was a really nice area of demand Bottom area of this area here this 0.6 actually was a round number right so pretty much the 0.68 round number is where it started to bounce from also as well the New Zealand dollar are looking to hike rates and This is pretty much what we've seen because they are you know starting to hike rates I'm going to actually just remove that and then create a new demand zone here and We've also got another one right there as well. So any pullbacks to demand I think are going to be really nice buying opportunities. Although the dollar isn't necessarily the best Pair to trade against Well, the US dollar isn't the best pair to trade against the New Zealand dollar I think the New Zealand dollar is is is miles ahead of the the US dollar in terms of monetary policy So any pullbacks down to here I think are would be actually be quite a nice area and those of you who are in the private mentoring group will recognize this area here as a Breakout CPR as well. So there's there's lots going for this for this area Down here But if you do want to get short on this currency pair, then I would probably say Where we are right now potentially is actually quite nice for a potential short as we did make prices did actually, you know Drop quite severely. So there's definitely a nice hard-out perspective With price so but I think the path of the resistance is going to be more to the upsides because the New Zealand dollar is one of my buyers And the currency that I am buying not necessarily against the dollar more against it Something like the Swiss franc and the Japanese yen moving on to the pound The pound at the moment again, we've got two strong currencies or say strong but stronger currencies where central banks are looking to potentially hike rates at some point and JP Morgan seem to agree that They move up their UK rate hike forecast after a strong job status So the bank of England may boost rates in the first half of 2022 So again, they're looking to appreciate their currency, right? The call is more hawkish hawkish Remember what we said about, you know, dovish and hawkish Then the median but follows bank of america and hsbc. So JP Morgan Chase Brought forward his forecast when for when the bank of England may raise interest rates saying the strength of the UK labor market Makes a move likely in the second quarter of 2022 So interesting very very interesting. So if that is again, if that data does support the narrative and there are, you know Jobs data still continues to come out, you know, quite robust and strong then you can pretty much You know Say that the bank of England will potentially be hiking rates now. What does that mean for the pound dollar for me? I think the pound are probably just ahead of the Fed In that sense, if they're talking about hiking rates, so any pullbacks I think into fresher areas of demand will be really nice buying opportunities again You'd have to really kind of see the data support that narrative though prices deceptive You can have good news and price can go down You can have bad news and price can go, you know higher in the short term But in the medium to long term you will definitely see what what the The market intends and the way that price was supposed to go. So Not a pair that i'm necessarily interested in on the pound dollar But i'm interested in again buying the pound against other weaker currencies. So So yeah, I think that's probably where we are if you are looking to short this currency pair right now I think it's a nice technical zone right to get short But again, you'd have to really believe that the dollar the u.s Dollar is an absolute bargain at this area against the pound for prices to really kind of reverse with any In any you know meaningful way or you've got these areas here to look for short trades For me, this is a harder pair to you know, try to predict Um as far as the direction because you've got two competing currencies So for me, it's not a pair that i'm really interested in Euro dollar on the other hand is shaping up to be a different story. So Um, you know, we obviously earlier spoke about the um the fed looking to taper and the euro Taper ring is just not on the car on on the ecb menu card yet, right? So they're actually lagging behind when it comes to looking at tapering, right? The latest ecb minutes confirm that at least in july the only thing that easy on the ecb's mind Was the new forward guidance and not tapering the summer of 2021 is clearly the summer of doves Dovish meaning that they want their currency to potentially devalue and depreciate whereas the Um, the federal reserve are taking steps to potentially look to appreciate their currency, right? So With that there is a divergence between The the two central banks between the fed and the ecb and for me the path again of these resistance remains to the downside I think if prices do come up to this 119 area and even even better if it comes up to the 119 50 or the one Just above that area there the 119 75 if prices can come up this high That's going to be a really nice short and again the data has to support the narrative. So You have to have at least good data jobs data out for the us and maybe not so good data out for the For the for Europe when it comes to not only jobs, but things like inflation and And overall GDP right now Um You know your options pretty much are You know start to look for potential short trades, you know now or the level, you know above to get uh To get short as far as uh buying the us dollar if you are looking to buy the euro For whatever reason because the euro could come out the ecb could come out and be actually start to be a bit more hawkish if they do if they do turn hawkish by the way I do think that this is going to be a really really really good Zone to look for any kind of buy trades. Yeah, if they turn hawkish at their meeting Yeah, then I think the upside potential is huge for the euro dollar and I will be switching my bias But it really is dependent upon You know euro European central bank sentiment and what they see So uh, so yeah, let's see what happens with that but for now I think the path for these resistance is to the downside uh euro yen Euro yen again, this is not paired. I'm really that interested in trading Too fairly weak currencies although the yen is probably the weaker out of the two in a risk on environment in a risk off environment The the yen is definitely something you really want to look for Look to buy and look to short this currency pair, but um from a uh from a risk on perspective I do think that um There are better trades. There are better pairs to buy Against the uh the Japanese yen, but if you are interested in trading this I think that's a decent level for a short trade if you are looking to get long again on the euro I think that's actually decent as well. So not really much to say um in this uh for this pair Ozzy dollar and Ozzy dollar, um There's a bit of proof of value right here Proof of value meaning that there's definitely some buying some strong buying going on because we did have this You know sharp move to the downside and all of a sudden we've got a strong reversal so there's definitely A lot of buying within this uh 71 50 to 71 round number area So I do think that if you do get a bit of a pull back into this zone here and again with um With the Australian dollar, I think it is a bit undervalued They have suffered from potential, you know what's their potential, but they have suffered from lockdowns But I think they are one of the currencies that if they start to you know, get their act together Get the vaccine roll out and they really start to outperform. I do think the Ozzy is Is a buy is is a really really good buy From a commodity currency perspective but um Again with this pair similar to for example the the the pound dollar Actually, no, I wouldn't even say similar to a pound dollar. I think probably for now I think the the the US dollar is the one to probably buy for now until you do have The Australian dollar does start to get some good data I do think the the US dollar is probably ahead of the Australian dollar the rba When it comes to monetary policies So partly his resistance is still to the downside. You can see where the trend has has been right And uh, yeah anything in and around this area decent shorts But once the Australian economy does get going and they managed to sort out their their their Delta variant and the spreading of their delta variant in their country I do think that this this area here is going to be a A really great buy against the US dollar Ozzy dollar again similar Uh to the US dollar, but I think probably an even better buy because the Japanese yen When it comes to monetary policy is way behind the curve. Um, so I do think that again any kind of pullbacks to this zone Right this 7850 area Is going to be a really really really nice buy really nice buy if we can get a pullback And in fact, that's probably the the currents. This is a currency pair that I would really pay attention to If we can get some sort of pullback and risk remains on as well as You know the Australian Economic recovery. I think that's going to be a really nice buy um moving forward by the way and just again to to To talk about the Japanese yen again the Japanese yen You really only buy the Japanese yen in a risk off environment So if you see risk off there's lots of uncertainty You know delta variant starts getting out of hand Then you should see prices actually start to fall and I think they're really the closest area to look for any kind of short trades Would be at this 81 25 to 81 65 area and finally gold now gold um reacting to in the short time, I guess To some dollar weakness, but overall I think uh gold may start to set off a little bit depending on obviously what the dollar does um and risk sentiment Gold is out bonds are in for investors Jackson Hole playbook So fixed incomes saw biggest inflow in seven weeks, right data shows and fed to power expected to reiterate tapering likely by year end So bonds are winning over gold in a battle for investors favored haven favored haven ahead of the Jackson Hole symposium according to bank of america corporation, so You've got you know the two main stores of value And safe haven asset plays are gold and bonds the the downside to to gold is that they don't pay a yield and bonds do right? So generally, uh, you would you would tend to have more investors Who want to make a yield will they make a return on their bonds or on their investment, right? So so so bonds government bonds are generally favored over Um over gold when it comes to safe haven place Now, um, if if money is flowing out of gold and into bonds Then, you know, basically you should get potentially some sort of uh pullback, you know or or sell-off Especially potentially if the economy the u.s. Economy has seemed to be growing And um, you know the Fed can get inflation Under under wraps, right? Um, so that's pretty much if if you start to see go. I'm sorry the u.s. Dollar make higher highs for example The effect should be actually um A lower lower gold price as gold appreciates So with that being said, um, again, it's it's a difficult trade for me and something that I wouldn't necessarily look to Buy or sell but it is a way to To to to kind of get involved in dollar strength by shorting gold as well So depending on obviously, you know, your approach why not just buy, um, you know The dollar against for example the end of the Swiss franc, um, you could do that or you could just short gold in favor of buying the uh dollar So, uh, but these are your areas to look for any kind of long or short trades if you continue to see Dollar weakness then these demand zones will be really nice And if you do see uh dollar strength, then currently I think this this this supply zone is decent Or anywhere around here is going to be decent for a uh, a particular Short trade anyways guys, that's it for this week. Uh, hope you enjoyed the the analysis again Please like subscribe press that like button and share with your trading colleagues If you have any, you know trading can be a lonely game Um, but if you do share it and it does get out to the uh to to to those in the uh in the internet world Anyways guys, take it easy. Have a great week. Relax. It's bank holiday tomorrow. Chill out And then get back to work on the Tuesday business as usual. So Have a good one and speak soon