 Hi, my name is Liam Rowe, currency trader and trading coach at Trading180.com. Welcome to this week's supply and demand for us in gold, fundamental and technical analysis. So looking at the data for the week ahead and the macros and what's coming up on the 20th of March, from the 20th of March. After last week's turmoil, investors will continue to monitor the situation in the banking sector and the weight-monetary policy decisions from major central banks such as the Federal Reserve, the Bank of England, the SMB, the Swiss National Bank and Rogers Bank. Also in the spotlight will be inflation figures for Japan, the UK and Canada and the ZEW Economic Index for Germany. Finally, PMI data for the US, Japan, UK, Euro area, Germany and France should provide some details about the health of the manufacturing and services sector in March and that's always important because the main data points that we're looking at in terms of understanding currency movements and strength and weakness or appreciation and devaluation is GDP and inflation. Those are the two real main macroeconomic data points that you want to look towards. Also as well in Australia, if you're trading the Australian dollar in Australia, all eyes will be on the PMI data for March and the minutes from the RBA's latest meeting as it will signal how close the cash rate is to its peak. The cash rates basically being interest rates and so all central banks now are ending their hiking cycle so it just depends on really what the economy is doing as well as inflation if there's more of an inflation threat but this year you're probably going to see all central banks now start to end their hiking cycle and even there are rumors of some central banks looking to cut by the end of the year or the market things that they might cut by the end of the year so we'll get into that a bit later. Starting off on the dollar index and all the dollar index is just a measure of dollar strength against the basket of currencies and before we get into the dollar index it's important to understand risk on and risk off when it comes to investing and investing or trading because ultimately it's the big money that moves the markets right retail are not really moving the markets so in the risk off what is risk on and risk off and risk on risk off is an investment setting in which price behavior responds to and is driven by changes in investor risk tolerance so risk on risk off refers to changes in investment activity in response to global economic patterns during periods when risk is perceived as low the risk on risk off theory states that investors tend to engage in higher risk investments when risk is perceived to be high investors have the tendency to gravitate towards lower risk investments and so this might make it a bit clearer when it comes to risk sentiment if you're not understanding just yet while asset prices ultimately detail the risk sentiment of the market investors can often find signs of changing sentiment through corporate earnings macroeconomic data right in forex we look towards again GDP and inflation data global central bank action right interest rates monetary policy and statements and other factors so risk on environments are often carried by a combination of expanding corporate earnings optimistic economic outlook accommodative central bank policies and speculation we can also assume that an increase in the stock market sorry that an increase in the stock market is a sign that risk is on as investors feel the market is being supported by strong influential fundamentals they perceive less risk about the market and its outlook conversely risk off environments can be caused by widespread corporate earning downgrades contracting or slowing economic data uncertain central bank policy a rush to safe havens and other factors just like the stock market rises relating to a risk on environment environment a drop in the stock market equals a risk off environment that's because investors want to avoid risk and are averse to it so you think about what we're in right now in terms of risk on risk off environment you would have to say risk off right and that then should indicate really what way you should be trading in terms of whether it's you know forex and certain for its currencies that respond to risk on and risk off whether it's you know the stock market whether it's commodities etc and so risk on and risk off isn't necessarily a light switch it's not one day risk on one day risk off there are varying degrees of risk on and risk off you know the most extreme risk off environment would be for example the 2008 financial crash or more recently you got the covid spread of covid in the lockdowns the Ukraine and Russia you know war that's going on but one thing I will say is that most risk off scenarios eventually basically sought themselves out right because as humans we want to you know solve the problem we don't want to be in a risk off environment forever right and so you know it's understandable that it is a scale there are varying degrees and we have to understand what the market is more focused on whether they're looking even past some risk off you know events and environments and more focused on in fact looking at the opportunity to actually look for bargains and cheap prices but at the moment it was like we're definitely more risk off than risk on and so SVB sends tremors across the banking landscape the commercial estate sector is looking especially risky right now so the knock on effect from SVB is being is being felt in all sectors so the Fed to consider a pause has fallout from SVB Royals the markets the UK Switzerland Norway Nigeria Philippines May hike and Brazil Turkey will probably hold rates this week now the Federal Reserve officials face their biggest challenge in months as they were whether to keep raising rates interest rates this week to call inflation or take a pause amid the market turmoil fueled by recent bank failures in this tough situation they bear in because they have a mandate in order to bring inflation back to their 2% target but they can't keep hiking rates aggressively to bring inflation down because the knock on effect from hiking rates is that you know you're getting things break right borrowing a lending cost go higher and this is one of the things with SVB Bank is that we're seeing the effect of hiking interest rates is that you know banks haven't you know done good business or done their risk risk analysis risk assessment and done bad investments then rising interest rates can affect many businesses not just banks so before the collapse of Silicon Valley Bank and the resulting fallout Fed policymakers were poised to raise rates as much as 50 basis points after a string of data suggested the economy was much stronger than officials thought at the beginning of the year right so when the economy strong or perceived to be strong rate hikes are appropriate because the economy can withstand higher borrowing and lending costs but if it's not then it can't and if it can't you know the cracks start to show and this is what's happened with SVB Bank now given the financial market volatility many Fed watchers expect a smaller quarter point increase and some say the US Central Bank will pause altogether after a two-day meeting that starts on Tuesday and so again you know the the economy contracting SVB Bank you know it's very hard the central banks to continue hiking now I think that if the central bank the federal reserve don't hike rates I can see the dollar really kind of falling at least down to the bare minimum possibly beyond that because I think the majority of the market is probably factoring in the 25 basis point hike and that's really been priced in I think probably between that low and that high is where you know the 25 basis point high 50 basis point hike is probably been priced in an evaluation of the dollar but I think possibly we could see prices come down here and maybe beyond that if there is a hold so we could come down to maybe the 100s and even probably maybe beyond that but let's see I think the dollar could still be a short-term buy if there is a 25 basis point hold I mean I see hold but hike right and also as well with the dollar actually being a currency that benefits in a risk-off environment yes SVB Bank you know is obviously an American bank and risk-off is emanating from the US but typically risk-off should support the dollar so anything any pullbacks down to you know these are 103s 102s are buying opportunities not necessarily buying the the dollar index but you know correlating to I'm going to another pairs other pairs like for example the I don't know the dollar CAD is one of one of the pairs I would look to buy if prices come down to this this one or two area and then looking for some positive price action and then if you know you see the dollar CAD in a demand zone then I would look for you know confluence and buyers on that dollar CAD as we're on down at this zone on the dollar index and so that's where we are with the dollar but again I think if they hold if they don't hike rates by any they pretty much just hold rates then I do think that the dollar should sell off the dollar yen the dollar yen in a risk-off environment the yen is a risk-off currency and so you're seeing what's happened over the past couple of weeks SVB bank prices go into the downside that's no surprise there so what we do have right now is technically a supply zone right there and so any pullbacks into a supply zone are buying opportunities potentially for the yen against the dollar me personally as well I tend not to do any buying and less we are at least at bare minimum around the moving fair value which traders would know as moving fair moving average but I refer to the moving average as a moving fair value because ultimately the average is telling you the mean the mean is the is fair value between a bargain and an expensive price 50% of that is fair value right and if you're looking at moving averages moving averages are just telling you the average right the average or the mean between a certain period now one of the indicators or the settings that I use is the 21 period which is basically the monthly moving fair value so ultimately I'm looking at the market at least at bare minimum I'm looking at buying at fair value preferably obviously bargains and cheap prices but you know if you're buying for example looking to trade in and around this zone here yeah and fair value monthly moving fair value is up here then I consider that to be you know expensive right it's expensive because I'm buying the the yen right which means I've got to go short so for me once the moving fair value starts to come down prices come up to the moving fair value then I know at least from an indication perspective I'm buying at fair value and I'm not buying the yen at an expensive area or expensive prices which is the reason why I was waiting for pullbacks because I did get a question asking why wait for pullbacks because you always want to look for the best prices and not for not just to just you know buy at highs and sell at lows right that's not really what you should be doing anyways any pullbacks into supply zones with the moving fair value the monthly moving fair value you can use the weekly if you want to but I personally don't and so for me if I'm looking to get involved in this the first area is going to be the supply zone but in alignment with that monthly moving fair value and anything above that monthly moving fair value is considered you know bargain price right so any pullbacks and that'd be my preference on the the dollar yen you can look for buy trades if you really want to you know down at these lows but I think the path for these resistance on that dollar yen is still going to be to the to the downside overall dollar at Swiss and we did come down last week into this zone this is seen as obviously a bargain price if you look to the left bargain prices went higher prices come down we had a bargain this is also driven by the credit suice as well but I think overall in the risk-off environment both currencies should potentially kind of cancel themselves out I can't imagine this trending I think if this does trend to the to the downside it will be evil because the Federal Reserve has have held rates and not a hyped rates by 25 basis points or if you know they basically high by 50 basis points which no one is really expecting the Swiss National Bank are also going to be looking at hiking by 50 basis points so ultimately I would actually expect the Swiss Frank to actually probably strengthen slightly over the US dollar but ultimately it's not really a pair I'm interested in anymore about a week or two ago I was more interested all before the SVB Bank situation risk-off situation I was more looking at buying the dollar but now you know it's not really a pair that I'm interested in but if you are that's a decent area to look for any kind of short trades or even just a bit higher up if you're looking to buy the Swiss Frank given to buy the dollar this level now has been touched once already so it's not necessarily the greatest area of demand you'll have to probably look for a lower area which would be somewhere around the 90s was it 1950 area dollar CAD now looking to get into the dollar CAD if I'm if the dollar the Federal Reserve do hype by 25 basis points so any pullbacks into the demand zone alongside the monthly moving fair value then that's going to be decent a decent buy for me but that's only if they kind of hike by a certain by the 25 basis points if they don't then all bets are off pretty much on this currency pair I'd probably look to buy if I'm looking to buy anything maybe somewhere you know down at the one three twos because I'd expect the dollar to you know to kind of set off we could even actually come all the way down eventually to the one thirties as well buying the Canadian dollar really isn't an option as they are not hiking at all they're actually on the holding the holding period but there have been talks that they could in fact hike rates if inflation does start to peak but it doesn't look like it at the moment New Zealand dollar US dollar and again I think from a risk-off perspective you would really want to buy the US dollar so any cells anticipation decent again it's really going to be about whether the Fed hike by 25 basis points or hold so and if you want to get in an anticipation of potentially a Fred hike then now is a decent time or maybe a bit higher up into you know this supply zone before anticipating a drop in the New Zealand dollar because again in the risk on environment will say risk off environment you'd have to you know say have to but you'd expect the US dollar to increase in value and the commodity currencies like the New Zealand dollar and Australian dollar to decrease in value but again I think at the moment I think everyone's kind of on on pause in terms of understanding what the Fed are going to do pound dollar and a pound is a bit of a bit of a strange one but I do think that although they're going to hike the expectation is that it's going to be basically a one-and-done and Goldman Sachs says the US sorry UK inflation to sink below Bank of England's 2% gold this year and if it does then the Bank of England are less likely to to hike because they see inflation coming back down towards the 2% target so they don't need to hike to push it right so UK inflation will sink below the Bank of England's 2% target by the end of the year if the £2,500 household energy bill cap is extended at this week's budget according to Goldman Sachs and I think it was and so the US bank banks economist predicted a rapid fall in inflation rate from double digits to 1.8 later this year after the plunge in natural gas prices it's lower than any inflation projection for the fourth quarter in Bloomberg survey and well below the current see a current rate sorry of 10.1% so that will be quite amazing if that does happen if inflation does fall below the 2% target and I think the Bank of England I think all central banks would actually love that so ultimately if the bank of England you know hike one more time and then that's it whereas the US dollar hike you know maybe a couple more times maybe 25 at the next meeting maybe another 25 basis points at the next meeting then and also as well the fact that you know maybe SVB and the contagion is kind of held I do think in fact this area here could be currently and also at the highest would actually be the limit of the move I can't see prices really going beyond that one to five area and if it does I'm looking for some sort of a stop-hunt around that area to look for shorts but again that would be dependent upon the federal reserve as well as a risk sentiment and a risk-off environment the pound shouldn't really do do well it's more of a risk on currency than a risk off but if you do want to buy the the pound then you're looking at really I think a pullback down to a bit of a wide zone here kind of look for a pullback down within that zone when you get a wide zone like that best thing to do is to look for some support and resistance within that zone as well so first pull back if you're looking for deeper pullback will be around the 119s before looking at getting long as we've had level level that's been business has been done around there so that would be the first and then actually low of that demand zone before looking at getting long the euro dollar for answer your dollar my bias is actually for a long trading you can see that this level has actually held really nice and that was really where we were so the euro is probably one of the most hawkish central banks but economists no longer expect ECB rates to reach 4% after turmoil so again risk-off sentiment is causing central banks to kind of rethink how aggressive they are with hiking rates so economists predict the European Central Bank will stop raising rates before they reach 4% the scenario that has was widely expected and priced in by investors until just a week ago so again the changing outlook comes from the collapse of Silicon Valley Bank in the US and troubles at Credit Group AG through markets in a tailspin raising the specter of a fresh financial crisis the ECB on Thursday followed through on plans to raise borrowing costs by another 50 basis points though didn't offer any guidance on future policy path so banks including Goldman Sachs Barclays now predict only two more quarter point moves and would take that and that would take the deposit rate to 3.5% Morgan Stanley and ABN Amarrow are among those expecting a slightly higher terminal rate of 3.75 so you can see what Goldman Morgan Stanley Deutsche Bank and this is what they're basically expecting you see Barclays you see Mordir IMG so again this is because as explained risk-off the economy global economy really kind of contracting in the fallout from SVB and so hiking when you've got contracting economy could make things a whole lot worse but saying that I think the euro is in a slightly better place than the US in terms of you know the the risk-off sentiment and the bank although credit Suisse is also a problem but I still have a more of a long bias on the euro over the dollar not necessarily the best trade for the euro but if I was looking to buy one or the other it would probably be more of the euro at the moment but you know you've seen basically a lot of buying you know by the by the institutions and so that's kind of validated the point but if we get any pullbacks I think that would be a decent buying opportunity for the euro now again it depends upon whether the US dollar hold if you're in this buy from anywhere around here if the US and Federal Reserve do hold rates then you can expect prices to really kind of go up to probably these 109 areas looking at the Australian dollar US dollar and again in a risk-off environment you would have to say the US dollar would be the the buy but Australia at the moment potentially is being supported by China and China's zero COVID policies meaning that they are coming out of their their COVID lockdown so why China's central bank has to cut is it's required reserve ratio to China cut its required reserve ratio to date by 25 basis points we think is partly to help the economy and provide a cushion against global market turmoil and so China's central bank the People's Bank of China cut is required reserve by 25 basis points to 10.5% this releases one liquidity of 500 billion and so all it is is basically saying that there's a required ratio that banks have to hold on reserve and they've lowered that now so the banks can actually don't have to hold as much in reserve and so they've the banking sector can actually support the the economy right and so if China continue to grow Australia a China's one of China's biggest trade partners and so if China are less affected by the banking crisis that's going on in the west then that should hopefully support the Australian dollar which is basically what we're seeing at the moment of course nothing is for certain and if it does you know the risk-off does become a global event then you probably may see prices come down to the 64 area but if China continue to grow and their economy then I think that the Australian dollar should want to benefit from that as well as the New Zealand dollar as well and gold gold you know rocketing up this is again to be expected and there was a nice buying opportunity a couple of weeks ago I've been saying pretty much for a whole year that if you go back for my past videos that the smart money we're looking to buy central banks were doing the most buying of any period of gold last year summer and in anticipation for what is going on so what made was gonna be forecasted and this is pretty much what's what's happened right the smart money buy here and in anticipation of what's happening so any pullbacks into a demand zone I think is decent again wait for for me anywhere I wait for any kind of pullbacks into fair value as well in order for me to want to get long in that in that zone if you're looking to buy the dollar then you're looking to short gold and you'll be looking to short gold probably right now that's if you think that the dollar is gonna strengthen I can't see the dollar really strengthening too much over the medium to long term in fact the dollar is forecasted to weaken towards second half of the year and so I think any pullbacks on gold if you're thinking to trade this a decent buying opportunities especially if you get back down to the 1820s which looks an absolute bargain right now right people don't recognize bargains until you see the highs and so all of a sudden it becomes FOMO we've got buy gold got buy gold and you know where is a smart money buy low sell high you know retail tend to want to FOMO in after after the fact and you won't know you know whether to buy or sell what is likely to happen in the future if you don't understand you know fundamentals and you know risk on risk off RORO yeah what they call RORO investing risk on risk off investing and this is really what drives you know prices this wasn't you know predicted by any kind of indicators this is what you know the investors are looking at in terms of you know the fundamental side of things anyways that's it for this week I hope you have a great trading week and take care speak to you soon