 Hi, my name is Leon Roeb, currency trader and trading coach at Trading180.com and welcome to this week's supply and demand for us in gold fundamental and technical analysis. Now getting into the data for the week ahead 20th of November in the United States, the main focus will be on the FOMC meeting minutes followed by durable goods orders, S&P global services and manufacturing PMIs along with existing and new home sales, internationally preliminary manufacturing and services PMIs will surface for Australia, France, Germany, the Euro area, the United Kingdom and Japan. Inflation rates will be scrutinized in Canada and Japan that would be definitely important as that will determine really central bank monetary policy. And finally Germany will publish their LFO business climate. So few things to look towards also as well this week is going to be a shorter week as there is Thanksgiving as well. So I think on Thursday, so short of trading week this week. So before we get into some of the technicals and some more fundamentals, just for those of you who are in the mentoring group, I have uploaded the analysis that I do for the private members in the trading videos channel. So just go to trading videos, click on the link there, enter the passcode provided and you've got trading videos and then basically you've got your more detailed fundamental analysis that goes into a lot more than you will see in this YouTube video as well as the previous week's videos as well that are all here. So getting into the technicals now and dollar index, just a measure of overall dollar strength and the dollar really kind of sold off this week and it was really based on the fact that inflation came down slightly more than expected. So it says here dollar tumbles most in a year as traders bet on end of US hikes and currency falls as yields tumbled rate cut bets moved up easing consumer price inflation spurs reset across markets. So the dollar tumbled by the most in a year after a soft inflation date led traders to ramp up bets. The Federal Reserve will start cutting rates by mid 2024, sending treasury yields plunging and the Bloomberg gauge of the dollar tumbled as much as 1.3% on Tuesday, the largest drop since November 2022. It stayed close to the previous days, close on Wednesday helping propel the one and ring net to the top of the Asia currency rankings. The moves followed the report that showed US headline and coin inflation in October slowed more than economists had forecasts. And really, why is that important? And it's because the hawkish bets are really fading, right? So the market was positioning itself for a potential hike. And now that inflation is still on its way down. And it came down slightly more than expected. The market is now pricing out the possibility of the Federal Reserve hiking rates for, let's say for good, but for this at least this hiking cycle. So hawkish bets fade to Fed swap contracts indicate that the odds of another rate increase have fallen to nearly zero with the timing of the first anticipated rate cut pulled up to May or June. And it's really important to understand this concept of rates next year being priced in. And I have a video, if you do a search on my channel or just on YouTube for its fundamental trading webinar, how interest rate forecasts move to today's price. And I really kind of go over how the market prices in interest rate hikes and cuts, you know, six to nine to sometimes even 12 months ahead of time, and how that actually affects today's prices and exchange rates, right? And so that's what's happening now. We're seeing rate cuts being priced in a slightly sooner, which is having an effect on dollar strength. And it says here the quote is that the markets have moved to pricing more rate cuts next year and pulling forward the start of the easing cycles said parish director of fixed income and currency strategy at Amundi US. He said there's a lack of fundamental data in the short term, the high probability of no hike in December and the market that is wrong footed could give us could give this rally some legs. Now I'm slightly of a different opinion in terms of dollars weakness. I still think the dollar may be supported simply because of the fact that the dollar isn't necessarily the worst currency out there. So when you look at the actual raw data, so for me, yes, I think the dollar was definitely overdue a pullback when you look at prices going from these lows in July to these highs in October. We rarely we didn't even have really a deeper at any kind of deep pullback. So I was probably thinking that there was going to be at least a move to the downside at some point. And that makes all the sense in the world. You know, we should probably even pull back to maybe some sort of fair value because this is obviously a bargain price down here. This is an expensive price for the dollar. And so a pullback to at least fair value was always on the cards basically mean reversion, right? So there's always a reversion to the mean, there always will be. And so, yep, you can see maybe a couple of weeks ago, I was saying that prices could come down to these these areas here. And so this is basically what's happened. There is still a demand zone at the moment. Yeah, so right now you could look for any kind of buy trades, not necessarily the dollar index, but just on any kind of dollar crosses. But I do think there's a possibility that prices could come down to this this demand zone also as well. There is you do have a level of support and resistance within that area of demand. And so there's so technically, I think this can be this is probably a really nice level to look for any kind of long trades. If you are looking to go long on the dollar, if you're not and you're looking for pullbacks on the dollar, then really you're probably looking at any moves up here for confidence prices to really kind of come all up here. Or if prices make lower lows, which actually they have technically, let me zoom in a bit, you can look for some short trades. So you're looking for prices to come up to this supply zone. And then on any other dollar cross, you know, look for any kind of short trades as this is basically seen as an expensive area for the dollar, as it's broken to new lows or pullback, this might be another bargain price or an expensive price, I should say for the dollar. And then it could be on its way down. So the dollar at the moment, it's slightly tricky one, but I do I don't think that it's going to be a massive sell off at at all. I think if it does start to sell off, I think they're still definitely buying opportunities for the dollar, right? Looking at the dollar, dollar yen, dollar yen, you know, is coming down as well. I do want to be more of a buyer on the on the dollar yen for the really the main reason of the data came out recently this week. And it was Japan's economy shrinks backing the Bank of Japan and government stimulus case. So return to contraction underscores fragility of recovery, weak yen inflation and uncertainties a broad way on outlook. And so Japan's economy slipped back into reverse over the summer, underscoring the fragility of the country's recovery and backing the case for continued support for the Bank of Japan and the government, which really is is they're looking to still continue to kind of what the effect of support is really to continue to devalue the currency. And so the contraction was much deeper than economists estimate of a 0.4% of shrinkage, the yen weakened against the dollar following the release. And Wednesday's data suggests that Japan's economic recovery is more fragile than previously thought and in need of continued government and central bank support, the results may give the Bank of Japan a reason to delay any policy shift. So no hiking of rates just yet or changing of yield curve control towards normalization in the face of continued uncertainties, including currency weakness prolong the inflation and a cloudy outlook overseas. So there were reasons to try to look for buy trades on that yen. But I think now with the economy contracting more than expected, I don't know about buying the yen I'd rather look for pullbacks. So any pullbacks down into, you know, one of these zones, especially maybe this, this where we are actually probably from now really, I think these areas are decent for to look for buy trades or down into maybe the 14850s, so that can go across. And these supportive levels are potentially supportive levels within within this zone. So again, as bad as you know, you might think the dollar is in terms of inflation coming down and the central bank not hiking rates. I think the the yen is definitely in a worse position. So I think again, where do a pullback I'm looking for starting to look for longs in and around this area on the on the dollar yen also as well, we do have there is opportunity, of course, to look for short trades. And that's where you would start to look for short trades up at these highs around the 151152s. Moving on to the dollar CAD and the dollar CAD this week did sell off, obviously, there is CAD data coming out on Tuesday, which is inflation year on year, as well as the FOMC minutes. And so I do think that there actually is an opportunity to buy the Canadian dollar, although I'm over all bearish on the Canadian dollar, I think there's an opportunity if again, inflation comes out higher than expected. So the forecast is for 3.2. If it comes in lower, then you would expect prices to really kind of continue to go higher in terms of the Canadian dollar getting weaker. But if inflation does come out higher than expected in terms of like 3.3, 3.4, that would indicate that inflation is remaining sticky. And therefore you could see, in fact, the Canadian dollar strengthen against the US dollar and we could, you know, see some downside. So again, I would probably look for any kind of pullbacks in either direction, depending on what happens with the news. But I wouldn't necessarily look for CAD buys against the US dollar. That's not really a pair I would look to trade if I'm looking to buy the Canadian dollar. It'd be something against maybe like the pound or the euro. So those would be the two pairs or even the yen as well. So if the CAD yen would be a decent bet, if you're buying the Canadian dollar in terms of buying it for the inflation coming in stickier or higher than expected. New Zealand and, yeah, New Zealand dollar at the moment, I would say zooming out a bit, yeah, where I think the New Zealand dollar is really just strengthening on the back of some dollar weakness, which is really what's been happening overall from the majority of currencies. So if you are looking to be a buyer of the the New Zealand dollar, at the moment, you'd probably have to wait for prices to come back down to this demand zone right here, or you're waiting for a higher high and then pull back into a demand zone to look for some long trade. So you're looking at a pullback down into that demand zone or a move that goes higher and then pull back down into that. If you are looking at buying the US dollar against the New Zealand dollar, I do think that this supply zone here is really nice for a potential sell. I think that's really nice and that sets up for a really nice stop hunt as well above the highs. So definitely some trading opportunities there. If you're looking to trade that pair, the pound dollar, again, this week or last week, we did have prices move to the upside, not necessarily based off of pound strength, but more just a dollar revaluation. So yeah, prices did come up to like the one two fives and kind of stopped right there on that round number. So the pound at the moment, again, not doing well either. So there was some data that came out, UK retail sales post-surprise fall is rate hikes bite. So decline of 0.3% in October blamed on consumer cutting back, pound falls as figures feel better. Again, rate cuts should come back come by May. So you'll notice in the theme with all these currencies is that rate cuts are on the horizon next year. So UK retail sales fell unexpectedly in October, adding to the impression that a string of interest rate hikes designed to beat down inflation is beginning to stymie economic activity. So the more you hike rates, the more you increase borrowing and lending costs in an economy, both for businesses and a consumer, then it will lead to economic contraction. So the figures, the retail figures are the latest indication that the economy is beginning to feel the effects of 14 consecutive rate hikes on the Bank of England in its battle against inflation. The squeeze on households is likely to intensify next year when an estimated 1.6 million mortgages are set to be refinanced at significantly higher rates. And so, yeah, it doesn't look great for the pound evil, right? So as much as, you know, the focus, the market tends to focus on the dollar and what the Federal Reserve are doing, the UK aren't necessarily in the best of positions either. And I would still argue, in fact, that the pound is in a worse position than the US. So my bias would still be to look for potential short trades. There is something to that. So for me, any pullbacks up into this area here, as long as obviously the data doesn't start to stabilise with the US dollar, I think this is going to be a decent area to look for a pullback. And again, when we look at these maybe yearly hires, yeah, they were yearly highs in comparison to, I wouldn't say necessarily yearly lows, but these are the most recent lows. You know, again, you would expect some sort of pullback to some degree we could pull back to some fair value, which actually might be about the one five sixes. So we could see something around here in terms of a pullback, but I think overall the dollar is still for me a sell. And if you do want to get long on the pound, again, just like the New Zealand dollar, you'd have to really wait for a pullback down into that area of demand or whether prices to, you know, make higher highs, then pull back into a demand zone, a newly created demand zone before looking at getting long pound yen, pound yen, I think fundamentally probably maybe want to look for buyers on the pound if I'm looking to trade this, probably be where we are now. So any pullbacks into that area there, I think a decent buys. So when it comes to short trades, I think you've just got an area where that level hasn't been touched, it's 2015. So I don't know where I draw a supply zone from there, but it's definitely an area to watch. I think if it breaks past this supply zone or this demand zone, then any pullbacks into that area, I think you're going to be decent for a potential sell. Of course, if you want to position yourself to get involved in going long on the on the yen, but for now, at least in the short term, the Bank of Japan are dovish. And so not really a pair I'm interested in trading to be fair, the divergence really isn't there, but there are decent buying opportunities as prices come down if you're looking to buy the pound. Euro dollar, Euro dollar again this week, we had prices really kind of make this massive move. I think it's a bit of an overreaction. Some market analysts are saying, but technically we've now created this demand zone and in fact come up into this area of supply where we also have an area of support and resistance. So there is significant trading or there has been historical trading in and around this area. We've got support there, resistance, resistance. So this area here, the 109s could be a decent technical level to look for some short trades. For me, buying the Euro, there's no reason for me to buy the Euro. I know some people are buying the Euro based off of dollar weakness, which is a trade idea, which is fine if you want to do that. But also just keep in mind that traders bet on the ECB rate cuts next year also, right? So rate cuts are coming across the board and weak economic data is fueling bets on lower interest rates. Germany's 10-year yield fell almost 20 basis points this week and so Europe's sparkling economy is causing traders to bet on faster pace of rate interest rate cuts next year. For the first time, money markets have priced in a full percentage point of interest rate cuts in 2024. Just two months ago, the expectation was that the European Central Bank would deliver a 75 basis point decrease according to Swap's pricing tied to central bank meeting dates bet some similar easing by the Bank of England accelerated Friday after a week of then forecast UK retail sales numbers. Traders are also anticipating 100 basis points of cuts by the Federal Reserve next year with signs of cooling price pressures on show this week. Plus oil's descent into bear market has reignited worries about a recession. So yeah, there's a lot of fear going around. It says here that the evidence builds that an aggressive string of rate hikes is starting to take its toll on the economy and that's the European economy and it's becoming harder to convince the market to follow the mantra of higher for longer. Germany's 10-year yield has fallen almost 20 basis points as we know. And so yeah, and what's interesting as well is this final bit here is that wages by traders around the world pull forward the timing of rate cuts causing some unusual market dynamics according to Steve Barrow, head of G10 Strategy, a standard bank Swap's pricing suggests that there is a high probability that the Fed will start cutting rates from May with the ECB following suit another, sorry, a month later and the Bank of England in August he said and he said that we think this is wrong and I agree with Barrow, Mr. Barrow, he wrote on a Friday and on Friday he said we find it strange that the market prices such an early Fed move when the economy is so much more robust than what we see in Europe and that's exactly it. This is the reason why. So because you have at the moment the European economy is contracted I think it's at minus 0.1 percent quarter on quarter whereas on quarter on quarter in the US you have the latest data was that it's a 4.9 percent. So if the eurozone is in the potential contraction phase and if they have one more quarter of contraction negative growth then they're in the technical recession shouldn't that really or that should make the European Central Bank really start to cut rates sooner because the US are a lot further away in terms of their economy and the growth of their economy. Like I said I would agree with Stephen Barrow in terms of why would you buy the euro when they're already in the contraction phase of their economic cycle and the potential for a recession. So let's see what happens with that. So my bias is not necessarily to buy the euro. Yes we've seen the euro pull back and again just to give it a bit of context you know the yearly high to where we are now in that low you know again we would probably do a pullback we've come back to fair value so I think this is starting to look now anything above fair value starts to look like a more of a bargain for you know the US dollar of course this could keep going higher but my bias is still to look for some short trades even if it goes up to like the one tens I think that would be really the reason why I would want to continue my short trades or short trade bias on the on the euro dollar regardless of what happened this week this is just another this is a better opportunity to get short and look for some you know some nice risk rewards trades. So that's where my bias is but of course if you do want to be a buyer you know there are some levels that you want to look towards in terms of either there or you can look for the 107s if prices do pull back that far. Euro yen, Euro yen again I'm not too sure whether whether the yen is going to recover anytime soon so it looks like continued buyers as bad as as bad as Europe is it just looks like the yen is just going to continue to weaken so any pullbacks into the 161.50 area I think is going to be probably nice for a to look for any kind of long trades or even down into the 160.50s or round number or the 159s so around there would be decent for a potential long. Aussie dollar let me just delete some of this analysis from the previous week so wherever you are now we've really been in this auction this range between you know the 65s right so between here and here right decent range right I do think that there's the potential for the Australian dollar I'm British on the Australian dollar not necessarily against the US dollar but I do think that the Australian dollar is is a buy but if you do want to be a buyer of the Australian dollar I think any kind of pullback really would be nice down into these 63 areas or again looking for a move higher higher high pullback into that higher low which would be now new demand like this and then you're looking for a potential buy into that so that's proof of value and in a pullback that would be a decent move but if you're looking for any kind of short trades and buying the US dollar then in fact I do think that any pullbacks and even above that 6550 area that could act as a really nice stop hunt to look for any kind of short trades to the downside or just basically a nice supply zone fresh area of supply and decent area to look for some shorts and looking at the Aussie yen I think any pullbacks on this is definitely going to be a nice buy so we can delete that supply zone zoom out a little bit yeah we're up at these highs just be mindful that you are buying in a potential expensive area but I do think any pullbacks into this 9665 area is going to be a very nice buy considering that you know the the economy for Japan has just kind of gone into that contraction phase and also as well the RBA are quite hawkish so I think any pullbacks going to be nice in this area here any short trades I guess you'd have to really look for either a pullback into the these highs or again and maybe a move above and maybe look for some sort of stop hunt above that level and prices you know come down but again that has to be really kind of driven by either Australian dollar witness or yen strength so it really just depends on which one you're looking towards and finally gold so gold um you know obviously with dollar weakness we've definitely had some some gold strength also as well you know bounced off of this demand zone here right at the top end of it but um I do think also as well that gold is looking like a medium to long term buy simply because you know we're looking at economics if we're looking at economic cycles right so economic cycles being going like this so where you have the expansion and boom phase of the economic cycle and then you have the contraction and then Boston slump phase and then you have the recovery you know expansion and the boom phase again and then it goes into the same thing contraction Boston slump right so if we're heading if the world is heading into a the potential for a recession right the contraction we're seeing economies around the world you know deal with things like stagflation and and contraction right then and maybe even the the US is going into the potential recession next year then you would think that that would be a risk off environment which should push gold eventually higher now how it goes higher nobody knows it could you know pull back it could do something like this it could do something like this it could even come down to you know to these demand zones here but overall when we're looking at what's happening next year potentially with rate cuts um you know fears in the economy over contraction interest rates working their way through the economy um then I would probably think that gold should want want to move higher over the medium to long term as I said no one knows in the very very short term what will happen but just basically if you are looking at buying on dips I think that would be um wouldn't be such a bad idea so yeah that's really it for gold if you are looking to get short there is a supply zone right here of course you would have to think that the dollar is definitely going to strengthen um so where we are now decent area to look for some shorts technically but um if you are medium to long term um bearish on on currencies devaluing due to rate cuts and recessions then gold should be really the buy on pullbacks so that's it for this week I hope you enjoyed the analysis and you found it useful and until next week take care and I'll speak to you soon