 Hi, my name is Leon Rowe, currency trader, a trading coach at Trading180.com and welcome to this week's forex weekly analysis for the week starting the 18th of December. And this will be the last weekly video for the year. I will put out some content during the next couple of weeks, but you know, for just the weekly analysis, there's going to be nothing until 2024. I do wish you all a Merry Christmas if you're celebrating and happy holidays and hope you have a great one and a great 2024. Anyways, now getting into the week ahead and looking at the United States, November's personal income and outlays report, notably featuring the closely observed PCE price index will take centre stage along with the final reading of the Q3 GDP growth, CB consumer confidence and durable goods orders. The housing sector will be under scrutiny as investors closely monitor key indicators, including building permits, housing starts and existing and new home sales that all kind of contributes to gross domestic products and shifting attention. Internationally, the United Kingdom will report on inflation and retail sales while Japan's focus will be on the Bank of Japan interest rate decision, interest rates and foreign trade data that is very important. We'll get into that as we get into the weekly analysis in Germany as we'll turn to the LFO business climate index, JFK consumer confidence and producer inflation figures and Canada is set to unveil inflation rates for November's GDP growth rate. So yeah, this week is probably likely to be a bit of a quiet week, although there is news coming out and data coming out, but pretty much the market is likely to be maybe a bit muted as volume starts to dry up. So getting into the weekly analysis and really starting off on the dollar index and the dollar index, just a measure of strength really on the dollar against the major currencies. And so looking at where the dollar is technically, probably looking at that area there in terms of demand for the dollar and zooming out a bit, you look at the yearly high and yearly low, we're down into really beyond what I would call fair value, 50% is fair value. And so we're coming down into potentially a bargain area, how do you know this is a bargain? This is where you start to look at the fundamentals and really the fundamentals are saying, according to this Bloomberg article, let me just scroll up that Fed prepares to shift to rate cuts in 2024 as inflation eases. And so the Federal Reserve pivoted towards reversing the steepest interest rate hikes in a generation after containing an inflation surge so far without a recession or significant cost to employment. And so updated quarterly forecast showed the Fed officials expect to lower rates by 75 basis points next year, a sharper pace of cuts that indicated in September, sorry, while the median expectation for the federal funds rate at the end of 2012 and 24 was 4.6, individuals' expectations varied wildly. And the federal funds futures markets are now pricing in six rate cuts for next year, up from four earlier this week as traders have fully priced in a rate cut in the Fed's March meeting. So what does that all pretty much mean? Forex is really driven by interest rates and that's really a main driver. It's not the only driver, but it's the main driver. And so the more I guess central banks pricing in the market prices in rate cuts or rate hikes is what you'll see is that that will be reflected on a price chart in currency appreciation or devaluation. So cuts will really mean devaluation and hikes will mean appreciation. And so you've seen this move right here, this was due to rate hikes and now you're seeing the expectation of rate cuts being priced into the market. It's never usually a straight line. Of course, this one seemed like it, but typically you do have higher lows and higher highs, lower highs, lower lows. Now the dollar, I do think that although economically the dollar is one of the strongest currencies, I think mainly they are going to be one of the first to continue cutting and cutting big and it's really due to the election cycle. I was talking about this with the guys in the private mentoring group that although fundamentally you would really kind of understand that there are other currencies that are in a worse economic situation that should really, they should really be cutting first, but it's an election year next year and so rate cuts they pretty much help with Joe Biden, right, in terms of putting money in people's pockets, boosting the economy and so I think that the dollar will cut rates and be one of this first central banks to cut rates and that's really the narrative going on at the moment and I'm going to run with it. So for me, the dollar although not an all outsell against all currencies, I do think is likely to be a sell going into 2024 and so if we look for pullbacks or if I'm looking for pullbacks anyway into any kind of daily supply zones, that is really where I'm looking at some sales of caution necessarily, I'm not looking to trade the US dollar index, but this is just a confluence and understanding where we are in terms of lower highs and lower lows, we know that this was a an expensive area for the dollar because it made new lows, so if you do pull back anywhere around this area, I think that's going to be quite nice for a sell trade. There are reasons to buy the dollar as well as I said, the dollar you can, although you wouldn't typically sell the dollar under these situations, I just think that because it's an election year and the market is pricing in, are going to be pricing in more cuts and the Fed are pricing in cuts as well, I think the dollar is likely to be more of a sell than a buy and that's really the narrative that I'm going with looking at the dollar yen and the dollar yen, the yen is looking like a buy and this is really due to the fact that they are the only central bank who are looking to high crates in 2024, so looking at the Japanese yen, the big currency flop of 2023 is top pick four year ahead again, so basically it was three straight years of outsize declines in the yen look set to end in 2024 and that's the view of market participants pulled by Bloomberg who on balance see the currency rallying next year as the Bank of Japan exits the world's last negative interest rate regime and its global peers cut borrowing costs, so while the rest of the major central banks are cutting interest rates, they are going to be hiking interest rates and it says here the situation won't disappoint the end bulls on this occasion, as said Shoki Omori a strategist at Mizuho Securities Co in Tokyo who seized a prolonged slump in the currency coming to an end, there's a lot of room for the Bank of Japan to tighten policy but they do seem determined, sorry there's not a lot of room for the Bank of Japan to tighten policy but they do seem determined to rip up negative interest rates and so I think this is going to be one of the trades for 2024, also if of course that does come to fruition in terms of the Bank of Japan looking to hike rates, so I think any pullbacks against pretty much all currencies are going to be nice buying opportunities for the yen meaning if it's the quote currency you're looking at short rates, so that's where really I am in terms of my bias, the dollar Swiss, dollar Swiss again looking at this and zooming out over the year year to date we are really down into these you know from yearly highs to yearly lows and so we are at these these lows right here, could this be a potential buy, again I don't think that the dollar is terrible but in based off of just interest rate leading in lagging in terms of who's leading the interest rate cut narrative, it looks like you're probably looking at some more short trades so looking at supply from here zooming in a bit and waiting for maybe some pullbacks into this area here or you've got a supply zone that was about there so you could look for any pullbacks up into that area there, so decent short trades if you're looking at shorts and buying Swiss franc over the US dollar if you're looking to buy the US dollar then you are you know looking for pullbacks into this demand zone before looking at the any kind of buy trades and that's to say that the dollar's going to fall off a cliff and go you know way beyond but there will be buying opportunities to buy the dollar but again I think from an interest rate perspective it looks like the dollar with cutting rates should actually look to fall into next year. Dollar CAD pretty much similar across the board, the CAD I don't necessarily like the CAD in terms of current fundamentals but I think they're probably like neck and neck with the dollar in terms of cutting rates so yeah I think this is probably a bit more of a trickier trade at the moment but if you are looking to buy I think right now is a decent area to look for buy trades we pretty much saw in the past that we've had you know this area was seen as a bargain price that may lead to new higher highs so we can see that potentially happening now or if we're looking at for example yearly highs and yearly lows really the yearly low would be somewhere down these one three ones between one three two fifty one three ones but if you are looking for short trades meaning you're buying the Canadian dollar then you're looking at the supply zones and so yeah any pullbacks into supply are decent areas to look for some short trades. Looking at the pound dollar and the pound did have actually some decent news recently UK companies report strongest growth in six months S&P says and so British companies saw the strongest rebound in output in six months reflecting more stable borrowing costs and higher demand for services a survey of purchasing manager showed and so that is positive for the for GDP although they did have some GDP news that came out that was not great it was a month month I think it was and so the I think the UK economy is expected to to kind of flat line and stagnate but yeah with the dollar looking at cutting rates sooner than the British pound you're likely to probably see any moves down to you know demand zones as potential buy trades and so this is probably where the next demand zone is and then you've got one just below here so any pullbacks into these zones I think a decent buying opportunities if you're looking to sell the dollar and again as the dollar devalues just naturally you're going to get the the pound moving higher or you should get the pound moving higher barring some economic catastrophe and then if the market starts to reprice the interest rates for the pound moving moving forward in terms of closer then in fact the pound will actually start to get weaker but I do think that currently with all the data that we know the the the dollar looks like it's still likely to devalue for a little bit the pound yen and again the yen I think should be the currency to buy for 2024 as they are the only currency and central bank that look into high crates and so where we sit at the moment in terms of supply and demand I think I'll just draw a bit of a demand zone right there I think any pullbacks into this supply zone up top and this high this high lower high I think it's going to be really nice for a short trade as we head into uh black said 2024 or we're looking at a buy trade right around here um especially down into these one seven seven lows again it really just depends on whether um the data does support the buying of uh of the yen so let's see if the data can support the uh the rate uh potential rate hikes looking at the euro dollar and the euro dollar um I'm going to go over a losing trade that I had um last week and um for anyone uh that sticks around I'll do it at the end of this uh this video and I one winner one loser I lost a trade on the um on the euro dollar an interesting one and then I am profitable on a New Zealand CAD trade which is going okay at the moment so looking at uh where we are from a euro dollar perspective um we have come up into this uh supply zone here bounced off it twice or once and then twice again um again I'm like I hesitate to really want to buy the euro um simply because although the dollar is you know doing um is is looking to cut rates I do think that it's neck and neck when it comes to um when they look likely to cut rates and so I do think that there's reasons to buy and there's also reasons to sell the um the uh the euro uh the 110 seems to be all just thereabouts is likely to be the the ceiling um for the the euro dollar I think at least in the short term um unless again there is some major news and improvements for the euro or there is deteriorating news and data for the US that's where you're likely to see prices break out of uh this uh 110 to 10750 or 10720 um uh auction or what is commonly known as a arrange and um looking at the fundamentals with latest really kind of uh statements from Christine Lagarde in the ECB and it says that ECB holds rates with inflation sinking but hastens bond exits so um you know the ECB uh sees weaker economy denting inflation and the risks to economic growth remain tilted to the downside Christine Lagarde told reporters Thursday in Frankfurt though she suggested that dangers for prices are more balanced and when they talk about prices talking about inflation growth could be lower if the effects of monetary policy turn out stronger than expected she warned so if if interest rates are too high and uh high interest rates do contract the economy because they make borrowing and lending costs higher which affects businesses and um and consumers right so it says here traders pulled back bets on ECB rate cuts next year now seeing one five five uh basis points of 165 basis points of easing compared to about 160 basis points earlier in the session so um again traders uh slightly readjusting uh their rate cut expectations only just um not by much and markets are pricing in an ECB cut as soon as March though Lagarde her has said no moves should be expected in the next couple of quarters so let's see whether um the market is right or she's right so um I think if she's right and there are no uh rate cuts by March then you're likely to see the the euro actually continue to move higher the euro dollar so let's see what happens there but for now I think there are reasons to buy and reasons to sell the euro dollar although I don't like the euro in terms of uh nothing personal but just from a uh data looking at the data perspective um I wouldn't put my money on the euro euro yen this could be a really nice trade um into 2024 I think the euro should decline and the the yen should be the one to buy again just if the data does support the uh the yen buying and the bank of Japan looking to uh high crates this year so we've got a nice um supply zone so any pullbacks up into the 157 157 68 area I think is going to be decent for a short I think anything above there I think you'd have to price will have to kind of create a level before looking at going short but that's really where my bias is if you are looking to buy the the euro then really down into this demand zone where we are is probably where you're looking to potentially uh buy the euro pound and the euro pound I think the pound has the edge on the euro at the moment so I think the par for these resistance is still to the downside although we've pulled back up into this uh this high this might be decent on a lower time frame uh to look for uh some short trades but from a supply zone perspective daily supply zone doesn't look like much you do have a level of support and resistance right here which it looks like price is reacting from um but let's see I think if uh many of the guys might may know this the stop hunt setup that we use I think this level here is a decent stop hunt the one uh sorry the 0.86352 area could be nice for a for a stop hunt but if you are looking for buy trades on the euro uh pound looking to buy the uh the pound sorry buy the euro against the other pound then you're looking at really a pull back probably down into uh actually let's see yeah maybe pull back down into these levels here before looking at getting short from the daily supply zone looking to find the pound and you're really waiting for price to come back to the 0.87 area which I don't know whether that will happen anytime soon uh euro swiss um as a result of a weak uh euro the swiss frank uh typically does um strengthen also as well the swiss frank scene at the moment as maybe one of the last central banks to uh cut rates um again there's a bit of mixed data around that but if that does turn out to be true in terms of the euro do end up cutting rates sooner than the uh swiss frank and the swiss national bank then again you're likely to see prices continue to uh to fall one thing to just be aware of though is that we are at uh multi year lows I think if you're looking at all of the data prices haven't been this low since um since september 2022 let's zoom out a little bit more actually we still got a little bit ways to go from uh 2015 remember that day as well when the swiss national bank decoupled from the euro that would send the send the euro down something like 2000 pips or something like that in a day um so this is we're going to be really the absolute low um still ways to go but if you are looking to short just be mindful that um you know you are short and kind of into lows you're really waiting for maybe a pull back up into an area maybe one of these uh the highs here before looking at getting short the australian dollar us dollar now the ozzy is again one of my uh top picks as well for next year so um I am looking to buy the um the australian dollar against various other currencies so my bias is really to look for any pullbacks into uh demand that was uh um a nice trade that had pulled back into a um an area here all right so that was really nice uh last a couple weeks ago move uh higher if you are looking to short the uh the australian dollar us dollar you've got quite a wide zone of supply here and when you get a wide zone of supply then what you do just break that down and you're one of the things you can use is uh an area of uh support and resistance within that area of supply and so if prices do come back up to over there or you've got a little one here as well um that could be decent in terms of uh looking at you know short trades but my bias would be if the uh the federal reserve are looking to cut rates first then um that should keep the uh the dollar us dollar weak against the australian dollar and any pullbacks are probably looking at buying opportunities australian yen again if the uh bank in japan are the uh only central bank next year to uh high trades then you would expect really the uh the yen to strengthen to some degree either there or there um again it really does depend upon the uh what the central bank uh say as well as the data but you know the market is trying to get ahead and anticipate that you know this is basically going to be uh happening in 2024 so i do think any moves to the downside uh pullbacks are going to be nice uh shorting opportunities in anticipation of that and finally looking at gold and so gold should be the uh the buy going into 2024 um one of the one of the things about gold that um um may keep it capped is the fact that if the us kind of avoid a recession right so if they avoid a recession then gold um may not be necessarily the all out buy um because although gold is a uh it is a uh a flat of quality in terms of um a safe haven asset safe haven meaning that in a recession or when there's risk uncertainty and and uh fear that the that gold will you know mark the market will tend to flood into gold but um if that doesn't happen then um gold may be capped to the upside but if the dollar does continue to devalue just purely as a you know um uh as that as gold obviously works uh opposite to an inversely correlated or yeah inversely correlated to gold then you should have uh gold go higher as the dollar you know devalue so that's really the the idea so i think any pullbacks into uh demand zone on demand zones should be really the the path at least resistance to uh to the upside so that's really where we are uh going into 2024 now uh getting into uh one winner one loser and looking at the euro dollar so looking at the euro dollar and uh it was a trade that i took on the uh friday the eighth of december and um typically i don't take trades at lows in terms of i don't sell at lows and buy at highs the first time i've done it in years and really the main reason why i did so was because on that day the uh non-farm payrolls had come out way better than expected and our employment rate came down lower than expected and so typically that is and that is actually you know really good news in terms of um the uh the understanding that a better than expected economy is should push back interest rate cuts right and so what we did see is a bit of a sell-off right and i didn't get involved in the sell-off and then we got a pullback yeah we got a pullback into uh this area here about an hour later or so that's me about an hour and a half later so i considered that this is probably likely just taking out a lot of traders who had gone short based on the data so when prices came back up to uh the one seven was this one seventies and one oh seven seven which was yeah which was around here um i decided to get into a short with a 20-pip stop with the anticipation at prices likely just stopping out traders who went uh went short on the data right and we had even more positive data michigan consumer sentiment came out much higher than expected and uh you know prices should continue to the downside now again it's not 100 guaranteed or anything like that um but that was really the uh the thinking and the process behind it now typically as well what i do is i get myself to break even by when i get to a one to one position i take a half and then i'm looking for uh just to basically run the rest so that if i'm taken off half at a one to one i've only got a half a position in and uh if prices stop me out then i'm pretty much a break even but i was you know i had a bit of strong conviction that the um the dollar should roll over but unfortunately i didn't actually get myself to break even and uh paid the price by a losing trade uh so prices did come back up um and and stop me out on the Tuesday the 12th of December so uh that was a small loss by the way i didn't you know put in any kind of full position i was already in a couple of other trades and so i just didn't want to put too much in so it was a small loss but a loss never the less so again the lesson in this really is don't sell it lows and again there's so there's so many times where you see you know breakouts of levels and they do continue going down um the only reason like i said why i actually ended up taking this trade was because i thought there was a some manipulation going on in and around here uh it turns out that um obviously the uh the market was waiting for uh some more central bank news in terms of inflation which came out and inflation was still sticky but the big news really was uh fomc and so uh with the projections that came out for fomc and the dovish um federal reserve uh that was the reason why prices really kind of went to the uh to the upsides um because overall the the bigger picture is that the fed are looking to you know cut rates regardless of what is happening uh economically meaning that you know they they shouldn't really cut or look to cut rates when you have a you know a decent economy you would probably more likely to hold rates and inflation is coming back down to the 2 target but um with the fed being a bit dovish you know basically prices just pulled back and that was and that was that right so that was uh one of the losses now let's go to the next trade which so far has been um i mean i mean a break-even situation with a bit of profit and that is the new zealand dollar cat so the new zealand cad uh technically um we were at a really nice uh area of uh supply and um i wasn't necessarily looking at this uh currency pair during the week but there was some news that came out with regards to the new zealand economy unexpectedly contracting in the third quarter so revisions showed uh nation was in a recession earlier uh this year and traders increased bets on reserve bank rate cuts in 2024 so there's that theme right and so um because the uh new zealand economy unexpectedly contracted in the third quarter fueling bets that the central bank would start cutting interest rates um uh this it was on it was on actually the the thursday the uh the the 14th right that happened i think it was overnight and so um what i did was i saw a really nice entry around here uh with a 15-pip stop i think i had something like that it was about a 15-pip stop and so from and that was the entry there and on this occasion i did take uh partial profits uh um at breakeven at a one-to-one so put took 50 percent off and now it's uh just a situation where now i can't lose on the trade if uh basically prices pulled back and stopped me out somewhere up here then um i'm pretty much done at breakeven right so um i'm looking for really prices to come down to at least the minimum of around uh this low here where we've got uh what's known as an unfair auction some traders will call it a fair value gap it's actually known as an unfair auction uh but somewhere around these areas here the 0.812 0.813 so that's really what i'm looking for so a decent risk reward uh trade and hopefully you know prices do roll over we do have um inflation rate year on year and so if this does come out higher than expected that would actually be positive for the canadian dollar and so i do think that prices may start to roll over as the market maybe prices out uh sooner rate cuts for the canadian economy so uh my my really my thesis is if the um new zealand dollar economy is contracting or is contracted what's going to push prices really above here so the likelihood i'm not saying that it can't happen but the likelihood is less for it for the new zealand dollar to appreciate and so i think going into 2024 uh barring any again major downside news for the canadian dollar and upside news for the new zealand dollar prices should want to fall away now if for example the data comes out for the canadian dollar and it's worse than expected let's say inflation comes out at 2.8 2.7 2.6 um that's really going to um push the expectation that the the bank of canada are likely to cut rates sooner and so i'll probably just get out of this trade with a uh with a small win but let's see what happens but those are really the two trades one winner one loser um of course i can't go into the full strategy of what i do around here on full entries uh that's really kind of reserved for the uh the private members group which opens up by the way in january 2024 early january early to mid january um i'll i'll put the date out probably either uh by the time you see this video or just check on the trading 180 website and uh at some point this week and i will have uh the the opening dates for you in case you would like to join and learn more about how to apply fundamental analysis to your technicals so guys again hope you have a great trading um what's a trading week not really this week but i hope you've had a great trading year if not don't worry as long as you're still in the game and you haven't blown up your account um then you're in your right and if you have blown up your account don't worry um just learn from risk management and uh you know get back in the game and in fact you might want to give my mentor a ring a go so uh guys take care speak to you soon all the best stay blessed and uh merry christmas and a happy new year