 Hi, my name is Leon Rowe currency trader and trading coach at trading 180.com We're welcome to this week's fundamental and technical supply and demand forex and gold analysis and starting off with the week ahead 20th of February so this can be found as well this analysis is on the trading economics.com website and short summary of what is coming on the important news is in the US the focus would be on the FOMC meeting minutes and speeches by Fed officials Investors will also closely follow personal income spending Personal income spending PCE price index and second estimate for Q4 GDP growth rates So the second estimate pretty much is just any kind of revisions for the already Q4 GDP so it's not really that important and this is a massive revision also the attention will be taken by fresh PMI manufacturing and services reading from major economies including the US UK France Germany in Japan and finally central banks in Guess New Zealand is what we're focusing on as the currency that we're going to be analysing in this video We'll one of them will decide on the course of monetary policy and then you can read the details if you scroll down now getting into the technical side of things and a bit more fundamentals in the In the dollar index so the dollar's been making some new highs right broke past this supply zone and As I always say there's no real level of there's a technical level That's going to stand in a way of really fundamental analysis What you're supposed to do is is Understand your fundamental bias before looking at a price chart and then understand Where you are on a price chart secondly and see whether you're a cheap or an expensive area now the dollar Seems to be appreciating and the really the reason why is because Fed officials stressed and need to keep raising rates to cool prices. So over the past couple of months What's really you know been going on is that the market has had one idea of what the Fed is probably going to do with Monetary policy and the Fed has been basically saying that they're going to be doing something else and There was this bit of a divergence between whether the market was would be correct or the Fed would be correct now Recently we've had not only you know Outstanding jobs numbers, but we've also had Inflation come out and even though it's kind of you know came out slightly lower than expected or then the previous month it was higher than expected and So the inflation CPI course consumer price index and core CPI Is really kind of seen it's seen as is a sticky so it's not It seems like to is trending down But it needs to kind of come down a bit more and at the moment It's being a bit stubborn. So in order to get the inflation down to their 2% target The Fed still see the need to you know hike a little bit more sort of Richmond Fed chief favoured 25 basis point increase in February and Miss Governor Michelle Bowman says policy not yet slowing the economy which Hikes can and tend to do right if you hike a bit too much it can contract the economy But at the moment it seems like obviously the Fed hikes haven't worked their way through to the economy yet and So With that being said I did say in my private members group this called group that on the Thursday We had a weekly call on every Wednesday a live group call on Wednesday Private members meeting and I did say after that in on the Thursday that I was saying yesterday's call I can see the dollar appreciating in the short term So over the next month or so as an extra rate hike is priced in But it seems as though the banks consensus is for the dollar to depreciate by the end of the year And I said I can see the dollar rising to even the 106 is one awaits in the short term But as the Fed ends its rate hiking cycle I think it should it should be the limit so borrowing some major risk event for either the dollar or globally Or inflation remaining sticky or rising so the counterforce to the dollar appreciation will be China reopening and risk on and so When we look at you know the 106 is to 108 You know, we've got some central back Um, it's his angel bank, but some uh some investment bank analysis that talks about you know the 105s to potentially the 107s 108s as well um Technically probably looking at this area here, but the more that the markets price in more Fed hikes is the higher the dollar should go and again in the short term And we also have this viewpoint from HSBC Bank talking about the market reassesses its view on Fed rates And that's due to rising inflation, right? So evasion is still seen as maybe sticky or you know problem Then the Fed have to hike more so in you know January right the gray line was what the market was pricing in in terms of the percentage of Fed Rates or what they would potentially be by a certain date, right? But now We have from the 8th of February They the market has really priced in The rates to be actually a bit higher in the short term any ways of March May going into July We should then see a you know a drop off etc. Right? So this HSBC, you know, these are some of the smartest guys I'm doing their analysis. So again in the short term. You're starting to see actually more Rate hikes being priced in one or two more being priced in which again in the short term Possibly I think if again the data supports that narrative Should push the dollar either to the one of fives or at least at the limit the one awaits But by the end of the year Or towards the summer and into the autumn and winter months I think the other dollar should want to decline. So with that being said I did you know saying the group that if you did want to be long on the The dollar that's not a bad idea in the short term definitely not so waiting for any kind of pullbacks Right into a demand zone, of course, you're not necessarily trading the dollar dollar index. You'd be looking for a pullback Into the you know the dollar pair the dollar cross and then just looking at this as confluence really and on the dollar index as a pullback and then just pull the trigger on a On a dollar cross like the dollar yen or dollar Swiss if that's what you want to trade or if prices do come back down to the 101's and there's really no reason for it to come down to the 101's So when I say no reason for example, you know, the Fed is still, you know quite hawkish in terms of their rhetoric and inflation is still sticky Then I think this is actually going to be a decent bargain to look to buy the the dollar if you are looking to sell the dollar Then I would say probably the highs Maybe the 105 round number 105 50s is probably where you want to start to look for any kind of Sell trades to short the dollar But the dollar is going to be a bit of a tricky one for now But I think the momentum really and I'm without using momentum, but you know, I would say the I would probably lean more towards the dollar appreciating in the short term then I would do You know the devaluing in the short term overall again as long as the data supports continue to support that narrative So moving on to the dollar yen and the dollar yen Given what we've just said about dollar The yen I am actually bullish on the yen, but I've taken a bit of a backseat on this trade I do think this is a really nice technical level to look for any kind of short trades, but with Dollar potential strength you could see obviously this reverse, but maybe not as much as As you might hope depending on obviously where your entry Is and you're all you know your stoplosses and what your risk reward is right? But I do think that if you want to do want to get long on the on the dollar yen This is decent. I think that the the Japanese yen at the moment. They're new their nominated governor new governor I think isn't that a pronounce it who dear He's actually neutral when it comes to whether he's hawkish or dovish on policy. And so I Think as I think the yield curve control should be coming to an end and monetary policy should be coming to an end But I think that is probably gonna start to gather pace probably more towards You know, maybe March April and I say March April like March is a while away March is what about another week and a half away But probably towards March April if I think any you know moves to the it to maybe the one three sevens I think a very good shorting opportunities and again as long as we start to get the the rumour that The yield curve control monetary policy is going to change for the Japanese yen There's been a lot of Forecasts talking about again going back to maybe the one two sixes one two eights and so the higher Prices go this exchange rate goes. I think it's decent shorting opportunity or again in a short term If you get any pullbacks into that demand zone, I think that's a decent long opportunity dollar Swiss dollar Swiss My bias would be to go low on this pair if you're looking to buy the dollar one of the Pairs I would buy if I'm buying the dollar against any pair one of them would be for example the Swiss Frank You do have some demand Right here and I think any pullbacks into this lower demand zone in 91 area I think is going to be decent for a buy especially just below around the 0.90 so that's a 90 cent area I think that's actually really nice technical buy for the US dollar over the Swiss Frank If you think the Swiss Frank is a bargain somewhere I would probably say maybe up to 94s 94 50s before looking at getting Short but personally I would probably look for in the short term anyway Any kind of long trades on that on that dollar Swiss if you're looking to buy the dollar same thing with the dollar CAD I think the dollar CAD I Think is a decent buy if you're looking to buy the dollar So any kind of pullbacks into this lower zone the one three two fifties I think it's going to be seen as actually a decent bargain for the The US dollar the US the Federal Reserve is still hiking rates and the Canadian dollar Actually, you'll look still look into hold rates and that is as long as Inflation isn't a problem in Canada doesn't become a problem again and so Central banks typically don't you know once they start to hold or once they start to you know You know start to cut rates. It tends to be a cycle. So they tend to Do you know their policy for a duration of time meaning that they're going to hike it tends to hike You know two three four times if they're holding they tend to hold for you know a good maybe you know a few quarters And so I do think that this might actually be you know the The beginning of a potential uptrend for the dollar CAD if you get a pullback down to these these areas here I shall think it's quite decent for a potential buy New Zealand dollar US dollar has come down to this nice technical level of 62s the New Zealand economy is going through Had a bit of a natural disaster. I think it was Cyclone Was he cyclone? It begins with G the name begins with G. I can't remember exactly what it was But yeah, which you know kind of devastated some of the some of the country the RBNZ the Reserve Bank of New Zealand are making their monetary policy and they're expected to hike by 50 basis points But due to the natural disaster that recently happened There was there is talk that they actually might Hiked by 25 basis points so lower than expected if it comes out lower than expected If they you know hiked by 25 basis points, I think the New Zealand dollar may start to sell off Especially as you know, the US dollar is actually starting to hike being priced in a bit more hikes than what was what was expected So ultimately, I think this pair not necessarily Trading this pair, but if you are there are supply zones there if you want to be a buyer of the The US dollar so you're looking for a pullback into this zone here before looking at getting short And if you're looking to get long I would probably look for a fresher area of demand as this lever has been touched what once twice Three this is that the third time so anything anything around that 0.61 area any fresh area of demand is a decent area to look for a buy trade technically pound dollar and the pound We had some news regarding inflation so Britain's easy inflation puts end of BOE Bank of England rate hikes in sight So Bank of England may make just one or two more increases So prices remain more sticky in the UK than in the US or Eurozone so Because inflation came down more than expected the expectation is for the Bank of England to actually not hike as much because As a rule of thumb central banks typically don't want to mess with interest rates if they can because they understand the effect that interest rates can have on the economy and so Yeah, you know Britain has turned the corner on the worst part of inflation since 1981 raising the prospect that the Bank of England may soon Complete its unprecedented interest rate hiking cycle. Yeah, so investors are now betting the central bank Key rate peaks at four point five percent this summer that suggests one or two more increases from the current four point 4% as recently as October a peak above five percent was being priced in so obviously now They're pricing in potentially only four point five percent which in the short term Could mean the pound looking at you know coming down a bit more. Yes, there are hikes But not as much hikes. So that has to be priced in so I do think that any pullback into a Supply zone around here actually is a decent area to look for short trades I am looking for prices to come up to here if it can and get and get short around here for for various reasons as well other than fundamentals and so Yeah, for me if I was looking to buy one or the other if I'm buying the dollar the pound would also be a top contender for me to look to to short against the against the dollar or buy the dollar against the pound Euro dollar so the euro dollar and Europe is still quite hawkish one of the most hawkish central banks at the moment when it comes to interest rates And this is because Again, high inflation High inflation is pretty much everywhere. So ECB Schnauble sees risk markets underestimate inflation Right, so border disinflation hasn't started If the official says in interview and transmission of policy action may be weaker than in the past and there was a couple of Quotes in here and it says I think this is one of them the markets of price for perfection She said they assume inflation is going to come down very quickly towards 2% and it's going to stay there Well, the economy will do just fine. That would be a very good outcome But there are risk that inflation proves to be more persistent than is currently priced in by financial markets and Talks about traders bolstered hikes Bolstered hikes bets after Schnauble's remarks fully pricing in a 3.75% 5% peak in the deposit rate by the end of October for the first time so Yeah, there are there's definitely More hawkishness going on so a 50 basis point hike next month is necessary under virtually all plausible scenarios She said insisting that there is no inconsistency between our principle of data dependency and these Intentions because it's very unlikely that the incoming data is going to put this intention into Questioning so it looks like you know wage growth is still picking up inflation is obviously still a problem and the ECB At the moment have room to hike and so I think definitely in the short term again short term Maybe month for two with the dollar being repriced in terms of you know, they're hiking a bit more I'm looking at potentially buying in and around this one or six one or five area I do think the dollar will have a bit of a Year I guess a ceiling to its appreciation When you have two central banks actually hiking at the same time What you should have is more of an agreed auction right fair value auction Some people know it as a as a range or sideways moving market It's actually known as a fair value auction I think the fair value auction should be really between this high and this low So I think to all the one of six one of five areas if we can get down there I think that's going to be really nice for a potential buy for The euro I'd expect prices to start to auction from around there. You do have a Excuse me a supply zone right here But personally I wouldn't necessarily look at that as a as a strong Supply zone I Would probably look at that more as this this area here would be the area I'd look for any kind of Short trades, although this is a definitely an option here intraday wise I Would probably look for Trades more and a 109 if I was looking for any kind of short trades But my bias is still long on that euro. So that's where I am Australian dollar US dollar the Australian dollar hasn't had some hasn't had great news at the moment, I think employment wise The data came out and it wasn't fantastic But I think the market is looking past that although obviously with the with the US dollar Strengthening you could probably see prices come down a bit lower But I think overall the Australian dollar is a buy and in fact I'm going to analyze the Aussie Swiss and a trade that I took a profitable trade that I took last week To give you an idea As to you know the type of trades that we look for in a kind of breakdown But if I'm buying the Australian dollar, which I am I'm not doing it against the US dollar because you know I think overall the dollar again their their Interest rates of being repriced which you know kind of strengthens the dollar a little bit I think overall if we do get a bigger pullback China reopening I did mention it again It was it here, right? So one of my concerns. I said, you know Counterforce to dollar appreciation will be China reopening Risk on and if that continues China will be a better The Australia and the Australian economy will be a beneficiary of China reopening and China economic strength commodity prices You know will rise due to Chinese demand and infrastructure and investment And so I do think any pullbacks are decent buying opportunities But just right now I'm very cautious on the Australian dollar US dollar when it comes to buying in and around here though Many will recognize that as a potential for a stop-hunt in that area, but I'm I'm gonna you know sit out I think my my main plays on the Australian dollar or the Australian dollar and The Canadian dollar and I'll get to that Sorry, my I should say my my main place to buy the Australian dollar would be against for example The Swiss franc and they can and the Canadian dollar. So Yeah, we'll get into that a bit later gold Again putting back due to dollar strength and so again this demand zone didn't play out We do have an area, which is okay, but I think a better area to look for Gold if you're looking to buy gold Yeah, probably down towards the 1800s just a bit further down would be a decent technical level into that demand zone But again, this is you know, you're buying gold based off of potential dollar strength So if you think the US dollar is going to Weakened right so inflation actually is coming down And the Fed are less likely to you know hike You know three or four times rather than one or two times Then you want to be a buyer of gold, but if you're looking at you know buying the dollar Because the Fed are looking to you know continue to hike interest rates Then gold may start to come down a little bit right and again come back to the the DXY if if you You know the dollar index starts to go up to the 105s 106 107s Then you have to expect gold to probably come down to somewhere around these 1800s to even like the 1760 1740s may actually be a decent area to look for a pullback to buy gold plus gold is due for Very deep pullback because we've just had this almost now I wouldn't say parabolic one, but we haven't had they really a decent pullback on cold So when you get moves like this Where you get kind of shallow pullbacks What tends to happen is you get bigger? Pullbacks eventually right so you get a move probably down to this area this 1740 I wouldn't be surprised if prices came down to that those 1740 areas before potentially looking at going Higher as the dollar index, you know prices come up to the 107s 108s starts to go lower so there's the there's that correlation there and Yeah, so my trade of of the week I'll break this down Not in too much detail because it would be unfair on the on the guys who are actually in the room for me to reveal everything that I do of course, but just You know the Australian dollar Swiss Frank took this trade and it was a profitable trade and so You know really the fundamental bias is to buy the Australian dollar against Swiss Frank in a risk-on environment, right? So first of all wearing potential risk on or more risk on then then risk off which would mean again with China reopening You know, there's zero covert policy. I'm going to definitely favor the Australian dollar the Swiss Frank I definitely you know their central bank are hiking rates still as well. So It's not, you know, a perfect divergence, but just on there on from a risk-on perspective, you know The Australian dollar is really tipped to be one of the buyers for 2023 and so all I'm looking for really is just pullbacks, you know on a daily time frame back into this demand zone Brilliant now. I have no idea whether prices are going to reverse here Nobody does right but when prices pull back and if the market agrees, you know The market agrees that this my entry is is the absolute bottom then brilliant I make some money right make a make some the decent amount if it doesn't then I'll just and it pulls back at even more and Gives me an entry then I'll get in right here, right? That's really how you know to trade or the idea behind trading fundamental analysis is just understanding where the bargains potentially are and so When we look at this trade prices had really kind of come down to This, you know this demand zone here and so I'll go down to like a four-hour and I entered into a few positions managed to get Into three positions and so The blue lines right here, right aware my orders were right well where my market order was at and I'm zooming a bit more So it was a 0.636 I had one at 0.635 355 and then I had another one at the absolute bottom, which was 0.635 Zero and I had a 15 pip stop, which is about here from that absolute low So I had three orders now you can see that all orders got filled right the top one the middle one and the bottom one all got filled with price and The bottom order. Yeah ended up Going for at least a three-to-one, but I took that off at actually a two-to-one, which was somewhere around here and Also as well Why why do is my orders are I get heavier as prices go down? It's meaning that top order, right? Got three orders and if you're looking to be a buyer, then the top order is 0.1 percent Yeah, the second order is 0.2 percent and the third order is 0.3 percent Yeah, and so With that Yeah, if I get filled and all free my total risk is going to be 0.6 percent of that so not every trade is going to be 0.6 percent. It depends on you know the What what price actually does but if I'm fortunate enough to get in all three then my maximum risk on this trade Is going to be 0.6 and I'll let the market, you know dictate Dictate that right and that's my maximum loss as well now on this trade Yeah, I managed to get in on all three positions and with a two-to-one on my 0.3 position it's lower position at the 0.635 I managed to do a two-to-one. So now my reward is 0.6 Yeah So now I've swing trading. I'm actually swing trading these two positions zero point three percent On these two positions and even if I lose these two positions Yeah, the maximum I'm losing is zero point three Which means that in fact I cannot lose on this because ultimately my profit now I banked is You know at the worst is zero point three percent Yeah on this one trade But the maximum amount I can make is you know, I mean unlimited really but my ultimate goal is for You know prices to actually reach to the highs of this of this auction here So I have a lot of upside potential on this if I'm right about this fundamentally against the Swiss Frank But if I'm not right about this Any more and the other two, you know prices come down then this is still a profitable trade ultimately So at the moment, this is where I'm swing trading and that's really kind of a breakdown of the trade And so so yeah, that's really one of the trades. I'm in this week There was a couple of others actually that I am in I Mean on the cad yen And a couple of others and so let's see how that goes But I thought that this would be a decent breakdown of Of this trade and really how you know, I approach the markets and how I Manage my risk of my trade so you can get a bit of an insight as to You know, how we actually trade a trading 180. Anyways guys That is it for this week. I hope you have a great trading week and Yeah, I will see you in the next video. Stay blessed and Cheers and thanks for watching The really the short answer now what we ended up going on to is actually a decent concept which was what makes the the pound or any currency Can you judge a currency's value based off of historical or Technical levels now, I would believe that The answer is yes and no Yes, in so far as it's a reference point. Yeah, so let's say, you know, this I was actually I'll go to a live chart Make it a lot easier. Right. Let's go to a live chart It's a good technicals are a good reference. So if we zoom out to the weekly Right, let's zoom out to the weekly Get rid of everything on the parts chart now if you've gone through the course You will know that what I say is is that at some point This is obviously deemed a bargain area for the pounds. This was a bargain area for the For the pounds back in 2020 During the during the pandemic. Yeah, brilliant. Excellent. Now as a reference point The question then becomes Is that a bargain? now Yeah, now price Just looking solely at price. It would suggest that it is a potential of course none of us know But we don't I don't base my Analysis on what bargain is a bargain is based off of price because price is not a reflection of value Yeah, I mean it can be but typically you need to know You know how what a currency or any asset how it derives its value and it's not through really looking at price I Understand 100% understand that it was a bargain here. So it could be a bargain there But on a deeper reflection What happened what what drove prices higher here for the pounds? Yeah May not be the same thing that drives prices higher here for the pounds Yeah, and So let's say prices come all the way down have come all the way down here now Let's say for example I don't know Rishi Sunak was the person that ended up getting Prime Minister and his policies would have been totally opposite You know from Liz Truss is obviously Because he would have ran on different policies and let's say for example the market thought that his policies were terrible Yeah for the pounds Because fundamentally, you know, we're looking at you know the fundamentals, right? That's what we're looking for is to derive value not price So although we can look to the left and see that it was a bargain two years ago a It's not the the same thing the reasons for the pound going higher is not going to be the same as as as today and So and be fundamentally we need to know what's going on now, which basically you You know makes us understand why price should go lower or beyond that point or actually if the pound is actually a Boggin down here based off of what we understand about fundamentals Yeah, so just because something is seen as for example the dollar might be seen as expensive Does that mean that the pound is cheap? Does that mean that the pound is cheap? That's the question to you guys it's not a rhetoric question Just just just to get just to get you know your feedback. No, it's exactly it doesn't something can stay expensive forever And also as well who's to say that this is expensive exactly It's two different stories. That's exactly it first of all now had this let's say for example This wasn't a weekly chart and let's say for example this nice little price action that happened Let's say for example one month ago. Yeah Let's say it happened one month ago Now you it's it's easy to determine whether anything has changed Fundamentally when prices come up to or down to this point. So let's say for example the the Bank of England's Let's just go into fantasy land and the Bank of England now have decided that they want to you know Everything is lovely with the economy right GDP is growing Everything is is is wonderful, right? they're growing going into the you know expansion phase of the economic cycle and Inflation is trending away and do you know what I mean? It's everything is brilliant and then you start to see this happen Yeah, prices are going, you know against the pound. Yeah, but The situation the scenario that caused price to go higher here has not changed Yeah, so GDP is good. Everything is good central bank is hiking into strength order that is Does this now look like a bargain or does it not today? Right month for go and nothing has changed by the way. Nothing has changed here. Yeah, we're still Snorriol fundamentals are still the same Exactly. It does look like a bargain now, right? Yes, it better see that exactly right So but and and this is the point. This is exactly the point whatever drove prices here and cause traders to buy yeah Price is not value and value is not always reflected in price if you can understand that The banks would have buy at bargain prices and you're not looking at this is and scratching your head and going Oh, well, why why why why why rather than just looking at it like prices are coming down This is absolutely a fantastic by an opportunity because nothing has changed fundamentally from like a month ago Then this is a bargain. Yeah, so so great, you know I'm thankful for for Edwin for for highlighting this and going through the conversation and I think it's a really important point. It's a very very important point That you know, we should we should make yes price Like I said, typically we know that to be a bargain or an expensive area It doesn't mean that this is going to be a bargain based off of just typically what price has done there We need to know The fundamentals and what risk sentiment is and what the central bank is doing, etc. That's what is the most important so More things to go over but loads of things to go over and something is very important as well, which is Where are we now Bank of Japan intervention language that is There's an article today Which came out which I thought was again Fantastic. No a great article