 Hi, my name is Leon Roe currency trader and trading coach at trading 180.com and welcome to this week's supply and demand Forex and gold fundamental and technical analysis if you're new a warm welcome to you and if you're returning an equally warm welcome to you and So just before we get started I guess I put out some fundamental questions as well as some psychology and just to see and check the temperature I guess of YouTube and what traders are really thinking about certain concepts and themes and fundamental and technical analysis and I basically asked a question Regarding a bit of a fundamental Conundrum and had a few votes 125 votes so far and it was pretty much 5050 and if you stick around to the end of this video, I'm gonna be answering this This question and giving you really a kind of breakdown as to whether you should go long bank a or Go long bank B. So stick around until the end of the video and I'll basically get into the answer on this So our approach just quickly when it comes to the forex market is really to apply fundamental and Technical analysis and use the best of both worlds in order to establish really the best trading opportunities So before we get into the technicals in a bit of in-depth fundamentals, let's look at the week ahead and Zooming in a little bit on the small writing so second quarter second quarter earning season continues So that's to do with the stocks elsewhere flash PMI surveys for the US UK Eurozone And Australia will be keenly watched while central banks in the euro area of China Your is really the one that we're looking at Will be deciding on monetary policy. So if you're trading the euro that is going to be very interesting China to a certain degree because They are the world's economic engine and so all eyes really are on China when it comes to Whether they want to devalue their currency or whether they're happy with the valuation of their currency because that does affect You know global growth, right? Well, it's a factor anyway The other key data to follow include US building permits and housing starts not so important UK and Canada retail sales eurozone consumer confidence Japan trade balance and inflation That's going to be something worth watching and Australia retail sales. So I think the really the big news this week, especially if you're trading the euro is going to be what the Euro the ECB European Central Bank Decide this weekend on monetary policy and forward guidance. So Yeah, I think that's pretty much it for this week So let's get into the technicals and a bit more fundamentals and starting off on the dollar index and the dollar has had this Recent run-up and this is really due to again monetary policy, right? This is when the Federal Reserve Fed Decided that they were a bit hawkish on hiking rates Reason being is because of you know of the economy GDP and really inflation as well, right inflation now recently Inflation has really been getting a bit out of hand. So the Fed on July the 15th Fed Powell, I think he testified to Congress and One of the headlines was that feds power says inflation uptick larger than expected and What what really is is put in pressure on the Federal Reserve is Inflation now the Federal Reserve have a 2% target, right? And if they're above that 2% target, which they are I think it's something like 5.4 percent then It puts pressure on the Federal Reserve to want to hike rates Which is usually, you know, which has the effect of appreciating, right? So hiking rates has the effect of appreciating a currency the problem is though is that the The economy might not be able to support a rate hike because it makes Borrowing and loaning expensive, right? It makes Mortgage costs more expensive and if the the economy hasn't had a chance to be able to sustain Rate hikes then it could Actually hurt the economy. So the Federal Reserve are very cautious of raising rates too soon. So The expectation is at the moment Bullishness for the dollar been saying this for a little bit But with some caution some some some real caution because if GDP doesn't grow, right and doesn't Isn't and it may be flat lines or the number doesn't come out as good as expected Then we could actually be in something called stagflation, right stagflation Around what's necessarily spell it all out, but stagflation is when you have The economy isn't doing great, but you have inflation well above the central bank target, right? So it puts the central bank in a bit of a tough spot and say a bit of a tough spot a very tough spot and if that does Come out its GDP numbers come out and its stalls are not as good as what's expected I would expect and you know the the dollar to really kind of try you know sell off because of the fact that It pushes the The expectation for a rate hike Further into the future rather than closer, right? so at the moment I think all eyes are going to be on GDP growth and But at the moment as the expectation for GDP growth is you know to to basically grow and recover You know, you're basically seeing the dollar And the dollar overall the dollar index start to You know go higher so as long as the data supports the narrative then it's Continued really dollar buys, you know so that's really the the The understanding behind it if you do want to take advantage potentially of some short trades Again, I would probably wait for some sort of negative dollar catalyst To get involved. I think this area here the highs 93's Would be a decent area But again waiting for you know the catalyst really and again, you're not really trading the the dollar index You're just looking for confluence if it starts to sell off on a dollar index Then look for dollar crosses like the dollar yen dollar Swiss dollar cad, etc. So moving on to the dollar yen And the dollar yen we did have some risk off sentiment which basically pushed prices, you know down But came down to a nice demand zone and now we're in this I guess we've kind of been within this little range between the one ten seventy and the one oh nine 53 now for me again if the dollar does prove to be, you know GDP does, you know grow and for me any pullbacks of buying opportunities as long as we stay in that risk on Sentiment then that's where really I want to be is my direction of travel there is a bit of a supply zone here not the strongest area of supply and Really be looking to trade that if for example, we get into some sort of risk off sentiment Yeah, so that there are global concerns global worries and it really does take hold of the market Right, then you want to see something like that or if prices come up to this one eleven Ten area to one eleven sixty-six area, but then then risk does kind of Switch to off or you get some negative dollar news and dollars sentiment Then you're looking at any kind of short trades within these Supply zones, but while risk is on Or more on-then-off for now potentially this could be decent for any kind of long trades At these demand zones Moving on to the dollar Swiss dollar Swiss pretty much same as dollar yen Prices did come down to this demand zone There was a really nice stop-hunt below that level that I think some traders managed to get involved in goes beyond really the scope of this It's a video but from a daily demand zone perspective Prices did come down into the zone brilliant and it's held potentially again as long as the Fed remain I Guess the expectation for the Fed to high crates before the Swiss Frank then the The market should want to make its way up. We don't know is everyone saying that this week It's gonna keep making higher highs and high lows who knows but generally the power for these resistance should be to the upside So let's see what happens With that if you are looking to buy it the the Swiss Frank anything Swiss Frank Swiss Frank is a bargain in and around these areas I would definitely say the this is going to be the first area to look for sell trades Before looking at getting sure and again If there's any kind of risk-off sentiment that comes into the market then that should benefit the Swiss Frank moving on to The dollar CAD and the dollar CAD Again a bit of a tricky situation where you've got two currencies that are you know pretty much Hiking rates or looking to high crates at some point in the future sooner rather than later And so these I always you know say this that this is more of a difficult trade While the you know the dollar has a bit more positive sentiment The Canadian dollar has been tapering and reducing their Their their quantitative easing which should again be positive for the Canadian dollar the question becomes though is that You know you want to really trade divergences or convergences, right? You're not looking to trade for me anyway when it comes to selecting currency pairs These trades are a bit more difficult to really kind of predict turning points and really kind of bargain prices Although I do think that probably the limit of the move is coming soon to some degree but again that also is dependent upon what the GDP Dollar the US GDP comes out as right if it still comes out as positive You'd probably start to see the path of these persistence to the upside But again, it's probably being counted by again Maybe some positive Bank of Canada news so it's very difficult when you have Convergences and divergence type trades. That's when you can see and predict trends a bit more easier than You know two currencies that are both strong potentially or both weak potentially try to avoid these types You know of trades anyways Again, if you do think that the dollar is a bargain at some point Then you're looking for pullbacks internet demand zone Or if you think that the Canadian dollar at some point will have will be a bargain in and around this area And maybe some dollar weakness then I think probably anywhere in and around these zones should be a decent sell But not a pair that I'm really interested in to be fair moving on to the Dollar news also New Zealand dollar US dollar and again, we've been in this range for about probably prices been contained between the 71 area and the 69 20 area from June So probably about a month now months worth of trading and that again makes sense Reason wise because you have two decent currencies looking to appreciate and But with the New Zealand dollar, right? New Zealand dollar. That's a recent news about the Central Bank paves the way for a 2021 hike so the New Zealand dollar are actually really ahead of pretty much all central banks When it comes to hiking rates hiking rates again has the or should have the effect of Appreciating a currency now against something like the dollar you may not you know see That play out in the in the short term or the medium term to any massive degree because you've counter to that you've also got the dollar who are looking to hike rates But against a weaker currency for example, let's say for example the yen or the Swiss franc That's where you may want to look for some long trades and buying the New Zealand dollar So this currency pair. I'm not too keen on trading There are definitely better pairs and easier pairs Or easier currencies to trade the New Zealand dollar against but if you do want to get involved in this trade to the To the upside, let's say for example, you want to buy the New Zealand dollar I would say any kind of fresh area of of demand in and around this zone here And in fact probably going to delete this year So I think that area there anything below that 0.69 30 area And into that that would be a decent buy if you do want to get short then you're looking at that area there or at least that area Here this supplies in a 71 25 area, but again, this is probably a harder trade to take and not necessarily the most desirable pair in my opinion But again, this is not financial advice not by any long shot Moving on to the pound dollar and the pound dollar We had some news in fact regarding the pound and it was from Mr. Saunders who is a voting member of the Bank of England? He's a policymaker basically Michael Saunders and the Bank of England may need to stop his bond buying stimulus program Earlier than planned due to risk due to the risk of rising inflation According to policymaker Michael Saunders in a speech in the morning or that morning three days ago Saunders said that the activity appears to have recovered a bit more than expected back in May when the bank drew up its latest economic forecasts and There was in fact a scroll up a little bit. There was a reaction to that. I think was it here I thought it was I thought it was here, but basically the pound that day That time in history it did actually Oh here it was so the pound dollar spiked almost 70 pips in the last 30 minutes after comments from the Bank of England Policymaker Michael Saunders. So removing stimulus also has the effect of Again of strengthening a currency not necessarily in this in immediately but Overall we could see prices drift to the upside Again against the dollar would be a very difficult trade because you also have the US dollar that is also looking to high crates Right, so it's a bit less predictable when it comes to You know looking for the direction of travel the path at least resistance So again not really a currency pair that I would look or be interested in at the moment Let me just sorry one second. I just want to lower this Around there. You've got some hidden demand from there. So I think overall Again, not too sure on this currency pair and when you're not sure just stay out, right? But if you do want to get long I would say probably a deeper pullback into these zones probably the one three six would definitely look like a definite bargain at some point You kind of expect, you know price to range at some point looks like where we've got a potential range is really from Here to here So this could be the bottom of the one three seven could be the bottom of the range And then we could see some some pound strength or potentially some dollar weakness or profit-taking Going on in and around these areas and when you do have for example To Currencies that are either strong or weak generally you may see or you should see a ranging market at some point And it looks like we are ranging between, you know, these two points So it could be at the lower end of the range and that would be a decent buying opportunity If you wanted to be long on the pound looking to get long on the dollar You do have a bit of lower highs lower lows being made right there and zoom in and We've got some supply right here So any kind of pullbacks Intra day by the way as well you can I would say some daily or intraday So zoom down into lower timeframes like maybe the four hour if you you know line this up with some You know support resistance for example and the top end of that demand zone Sorry that supply zone is decent, you know for potential short trade if you want to get short there And the guys will also who are in the group will recognize What this is as well. We've got a bit of a stop-hunt around there and speaking of the group My mentoring actually comes to a close in the next eight hours So it's about maybe 10 o'clock 11 o'clock London time if you're not in the group from then then that's pretty much it for the next Maybe might be for the year. I might open up one more time Later on this year, but really and truly when you're looking and trying to trade one of the benefits of mentoring is really getting Direct feedback right if you're trying to learn something Enduring a classroom you really want to be able to ask, you know, your teacher questions, right? There's only so much watching videos will get you there's only so You know, you don't need to learn so much from Watching videos and mentorship is really important in any endeavor in life so take the chance to join the Discussion room join mentoring the guys are already finding Some success in the room Kieran for example Recently, he said he just joined last week. Nice to meet us everyone on the platform We are a friendly bunch learning a lot of new stuff, which he never knew and my fundamental analysis Videos are very informative. In fact, he has succeeded on the Euro Swiss trade, which I took this week as well Earlier this week with some difficulty. He also says that Leon's videos are very high quality material and I also get another question from From traders saying well, is it the same as what I put out on YouTube? What I put out on YouTube is a very small snippet a very small part of the overall what we do in the group so if you like the YouTube stuff that I do then the the private mentoring group is going to blow your mind too much You know lots of content and again, I'm very interactive We have fundamental live fundamental calls and trade videos as well and webinars as well that you can see our call starts zoom call starts We had one on the 16th. Anyways, if you do want to join brilliant if not, I have plenty of content on YouTube and Maybe next time if I do open up anytime soon, you may want to join then so By the end of pretty much today, London time, that's going to be it for the foreseeable future. Anyways Let's get back to the trading and going back to the Euro dollar Euro dollar go back on to the daily timeframe charts We got their delete Let's see what we have right so European central bank is in a bit of a Difficult situation right so the ECB is split on stimulus guidance as policy makers Consider drafts so discussion is said to be getting heated before the 22nd of July meeting talks on bond buying program Won't happen until September and what was interesting was that? Where was it now it was talking about yes is while the governing council Unanimously signed off on the language in the review It also agrees that any premature tightening of policy must be avoided. It's more hawkish and more dovish members Some distance apart on how to reflect the new strategy in current policy So the discussions will the discussions are becoming intense and heated officials said so When it comes to future and forward guidance on what the European central bank is Potentially going to do there's a lot of question marks around it Which makes Europe a bit more dovish right? Which is hence the reason why you're seeing this right you're seeing lower highs and lower lows continue Yeah, because you've got on one hand You've got the Federal Reserve which at the moment are looking to high crates and the European central bank are in a state of Confusion at the moment. They're not too sure on what to do So as there's a lot of uncertainty you would think that the path of least resistance is literally just looking at pullbacks and shorting The euro dollar at least in the short term once Europe do get their act together I do think though that Europe and the euro should really have an explosive upside But it's really just about timing The that and for now I think against the dollar anyway I don't think that's coming any time soon. So and as they said this is as the article kind of mentions any anything to do with the premature tightening of the policy must be avoided right so They are very cautious of Talking about potential hiking rates because again just like the US dollar and the US economy They don't want to hike rates too soon because it the economy may not be able to support rate hikes And then if they basically the economy would be set back right and it would hurt the economy So for me if I'm looking at any kind of Trade on this currency pair. I think the path of these resistance is to the downside There's also a lot of bank forecasts that are forecasting the 117 116 115's Over the next couple months or so anyways Yeah, so I think that's pretty much it if you do want to get long if there is a change in sentiment Then you're looking at anywhere within this demand zone for any kind of long trades Moving on to the euro yen euro yen has come down into a decent spot Levels been touched now twice probably prefer this area to come down before getting long I do think overall that the euro was as weak as it is or potentially dovish as the central bank is I do think that against some currency pairs or some other currencies It could be a decent buy so There could be a buying opportunity right now if not just at the lower zone or If you're looking to buy the Japanese yen not too sure why you would want to but if you are then looking for prices really to come back up to the This is this supply zone again You would really want to wait for some sort of risk of sentiment To kind of justify me anyway justifying Buying the Japanese yen as the yen is a safe haven currency and would benefit from a risk of Environment moving on to the Aussie dollar Aussie dollar The Australian dollars lag a bit lagging behind The US dollar and again US dollar at the moment ahead when it comes to potential monetary policy and hiking rates You're basically seeing this Play out in price right the Australian RBA Reserve Bank of Australia are probably slightly more dovish Then the US Federal Reserve So you're seeing this play out and again if I'm looking to buy the Australian dollar Which I am it's really not going to be against the US dollar because again You don't want to really trade or try to avoid I try to avoid trading anyway to currencies that are potentially strengthening or appreciating so If you do want to get involved in this to the downside again continuing buying the dollar against the the Australian dollar and Taking advantage of any kind of dollar hawkishness This would be the area and then you've got your supply zone just above that as well in case it does pull back To a decent zone, which I do think probably be somewhere Around here. I think yeah, that should be decent for a potential a short trade within that wide area of supply Moving on to the Aussie Yen and Aussie yen Again We're coming down. Hopefully into a nice buy zone. I do want to be a buyer of the Australian dollar Just can't do it at just any random point for me This is where there was a nice Area of demand you can see here where prices pushed higher This was definitely seen as a bargain earlier in the year and the question is will this be seen as a bargain price? You know now in July, right? If it does come down for me, that's where I'm looking for any kind of buy trades If you are looking for any short trades, then you're looking at supply zone right there Waiting for a bit of a pullback again more risk off sentiment coming into the market could see prices Go to the downside, but for me for now as long as risk remains at least neutral to on then You know for me buying opportunities anywhere around this demand zone is where I'm personally looking for An opportunity to get in long Moving on to finally gold and gold Again a bit of a strange one was we were talking about this in the group regarding Gold's a bit of gold conundrum, right because because you've got the dollar which is You know traders are generally a bit hawkish right and expectation of great hikes Which should appreciate the dollar which then should have the effect of? depreciating gold because gold and the US dollar work inversely But you also have another school of thought with regards to inflation so inflation is rising and When inflation rises, especially when it's above 2% target, which is potentially getting out of control Which is what? Jerome Powell or larger than expected. I won't say the city out of control, but it's definitely larger than expected that actually Inflation high inflation Should have the effect of boosting gold higher, right? So you've got all these kind of conflicting Ideas going on with gold which one is going to prevail So when there is a lot of confusion or uncertainty in a trade What's the best thing to do for me is just not trade it, right? Just don't trade not to trade every single Currency or asset class only trade when there are clear divergences convergences Going on right that's where you want that's what quality is all about when we speak about quality ideas and fundamentals Right, so but if you do want to get long Then this is going to be the first demand zone to really look for any kind of long trades If you believe that the dollar should get weaker and inflation or is really in fact is getting weaker, but as far as the Federal Reserve may not hike rates soon They may start to delay hiking rates and the market starts to think well instead of doing it in 2023 It might be in 2024 then you're probably going to see gold make higher highs But if the Federal Reserve if the if GDP comes out really positive Right for the US then you're probably going to see This happened because the expectation of a rate hike should cap the any kind of dollar Inflation which would then send gold to the downside, right? That's the fundamental analysis on this anyways If you do want to get short Probably wait for proof of value surprise to kind of maybe break that demand zone and then maybe a bit of a pull back And then looking at an area of supply which would be somewhere around here Around this 18 30 area to look for any kind of short trades at the moment So again bit of a tricky one, but the path of these resistance in my view anyway until really GDP comes out is Probably more to the upside more sorry, not Dollar upside but gold downside so potentially More short trades to come depending on what the expectation for inflation is anyways guys that brings us to the end of the Weekly fundamental analysis video for those of you who stuck around and is still here. I'm about to get into the the question that was posed earlier regarding Bank a and bank b So again, just to remind you guys of the question Bank a the base currency has an interest rate of 3% the market thinks that Bank a may want to cut rates to 2.75 in six months Bank B Which is the quote currency has an interest rate of zero the market thinks that Bank B will hold rates for the next six months Should you go long or short that currency pair and why so there were 125 votes so far 56 were saying long and 44% were saying sure and I'm gonna put you guys out your misery. In fact the shorts win so let's get into really the the reasons why and the answer is That you want to sell Bank a as they are cutting rates Yeah, we should assume that if a central bank is cutting rates GDP right so gross domestic product is Normally in the contraction the recession phase or the bus slump Phase of the economic cycle. Yeah, so whenever central banks are cutting rates Yeah, that's where we generally are in terms of The economic cycle. Yeah, so remember that the market. Yeah, so the smart money, right other smart money So that they are telling us what they think the central bank will likely do with rates So if they think that they're going to cut rates, yeah It means the smart money are positioning themselves, right for a Devalued currency cutting rates devalues the currency hiking rates has the effect of Appreciating a currency so a central bank that is holding rates is Usually or typically in the recovery phase of the economic cycle Although they do hold during the contraction phase also. Yeah Because they're on a wait-and-see approach if they're holding they're waiting to see what the economy is going to do but generally Holding is in the The the the recovery phase. So yes Bank a has a higher interest rate But due to rate cuts Rate cuts being Devaluation the market has to reprice the future expected change that rates will have on the currency Therefore the value of bank a's currency is likely to fall because what do cuts generally do? Devalue the currency that's the effect it should have so although Bank B is holding rates and has a lower rate or a lower Interest rate than Bank a banks B Bank B's future value has already fully been priced in So what is known about the about Bank B is that they're going to hold rates? Yes It might be for example, they might be on zero But what is known about the value of that currency is known and it's been fully priced in but as a result of Bank a's Expected cut the currency pairs exchange rate will likely fall because as previously mentioned Bank a's currency appreciation strength needs to be addressed Yeah, so the valuation of Bank a's currency needs to be addressed Yeah, so the knock-on effect is a is a short is to short Bank a's Currency as Bank B's currency would appreciate as a result of Bank a's attempts to depreciate theirs Yeah, so again imagine You have You know, what is known? I guess maybe maybe like even like a scale one second. Let me just draw this out on sick Right, so imagine you have a bit of a scale. Yeah bit of a scale in fact, let me draw that as Changes to a nicer color Right, right. Let's say you have a scale Yeah, and in fact I'm actually doing that wrong again, right? Let's say for example, you have a scale like this All right Now this is the weaker currency. This is Bank B Yeah, and this may be Bank a right Bank a is the heavier of the two Now if you adjust Bank a's weight if you make that lighter. What is going to happen Bank B? Yeah, or the weight of Bank B hasn't been moved. You've only just adjusted Bank a so what's gonna end up happening to the scale the scale is Going to do something like this and rebalance, right? You have to rebalance A and B because a has changed Yeah, a has changed So as a result as a result of that it may look like B is getting heavier, but it's not It's a that's getting lighter. Yeah, so if you take that concept, yeah and apply it to The the forex market that is the reason why I understand yes One has a higher interest rate than the other, but that's not how it works. It's not typically how it works There's there's further Nuances right and it's not my opinion by the way, this is not my opinion This is all backed up and you guys have seen this book Well, you might not have seen this book but by Brent Donnelly who is a market maker for HSBC He also explains this concept, which I highly advise you to have a look at and buy It's a great book and really will assist you with your fundamental analysis It's the art of currency trading by Brent Donnelly and he explains this exact Concept yeah, this is a market maker HSBC market maker telling you So it's not you know my opinion This is not some random person on YouTube telling you and you can disagree right if you disagree with me in fact You're disagreeing with a HSBC market maker. Yeah, we've I think he has over 20 years experience, right? So It's not my opinion. This is what the realities is are as well as me You know trading through this and seeing and giving you it I can give you examples of this as well Right. I've traded through these examples, right? So that's your answer Thanks for you know Taking part in the polls as well to all of you that have taken parts in the polls and even commenting as well This is a learning Exercise education the more you participate is the more that you will learn as well If you sit on the sidelines, don't vote don't participate Don't give your ideas. How are you supposed to get any feedback and improve right? So it's all about improvement and it's all about understanding We're not gonna know everything about everything but as long as we you know take You know knowledge from certain places and reputable sources then You know our journey to profitability and success within the markets should be on the upturned anyways guys take care. Hope you enjoyed that and Speak to you all soon