Supply And Demand Weekly Forex Forecast including Gold and S&P 500

Hi, my name is Leon Rose, currency trader and trading coach at trading180.com. Welcome to this week's supply and demand Forex, gold, and S&P fundamental and technical analysis for the week ahead starting the 16th of August. Hope you're all doing well and had a great trading week. So, getting into the week ahead's news and data, and this is from tradingeconomics.com, and they say that the ongoing standstill between Iran and the US should continue to dictate energy prices and influence global interest rates after the US prolonged its economic pressure on Iran instead of signaling efforts of diplomacy. Rates will also take the spotlight with minutes from a divisive meeting from the Federal Reserve, which included three dissents. The ECB will also post-meeting accounts data from the US will be headlined by flash S&P PMIs, building permits, trade terms, and industrial production. PMIs will also be published for the Eurozone, Japan, Australia, and the UK. Meanwhile, both the UK and Canada will release inflation and retail sales. The Eurozone and Germany will release ZEW economic sentiment uh indices. Japan will release its Q2 GDP, trade balance, and inflation rate. In the meantime, China will publish industrial production, retail sales, housing price prices, and join Australia, the UK, and Canada in unveiling unemployment figures. So, lots going on this week. And uh looking around the markets and just looking at risk sentiment and kind of intermarket analysis, and understanding really where uh traders are likely to uh place their money and really more so um what kind of strategies they're likely to use. Uh we look at in terms of risk on and risk off sentiment, looking at the VIX. >> [clears throat] >> We're in a low volatile environment and in low volatile environment, traders will typically, usually, look for um, yield return strategies. So, rate differentials and carry trades. And, um, uh, risk sentiment at the moment is looking more on than off, right? So, bit optimistic when we're above the 20, uh, zone, it's normally in a in a bit more of a higher volatile environment. Uh, it's normally seen as a bit of a risk, uh, off environment where traders will take their money off the table, uh, in terms of, you know, uh, they're more focused on safe haven and protecting their assets and going into, you know, assets like maybe gold and and, uh, maybe government bonds and even the US dollar, right? Depending on what the risk, uh, event is. But, at the moment, uh, definitely risk is more optimistic, more on, uh, low volatile environment. And that is also backed up by, uh, the S&P, right? So, in a risk on environment, we typically, uh, have money, uh, again, going into higher yielding assets and the S&P is one of those, right? So, we're creating new highs, hitting those, uh, 7,820s, it looks like on the on this broker. So, um, so, yeah, that kind of confirms, really, uh, more risk, uh, on sentiment. Gold, although gold typically doesn't necessarily rise in a risk on environment, um, uh, the the gold is more rising as a, um, as a counter to really kind of gold, um, sorry, the dollar kind of being on on the weaker side, right? So, gold moving higher over the last, let's say, for example, let's look at the month. Yeah, you can see here, we've got monthly gold. Uh, date, you can see gold here. Uh, but again, uh, gold really moving, um, higher based on making these monthly highs based on, um, dollar um, dollar weakness. And we'll go over the dollar weakness uh, in a little bit and then we have the US Treasury yields which are, uh, indications of really where, um, interest rate expectations, inflation, and GDP and uh, investor confidence in government debt. And uh, you can see here that the two-year Treasury on the on the dollar has really kind of moved to the downside over the last, uh, few weeks. Right made this monthly high in July, but now we're at these monthly lows and uh, that's really the the bond market pricing out, um, rate hikes. So, the the rate hikes that were priced in and expected, um, in late July. So, that's, um, uh, caused a bit of weakness for the, uh, for the dollar. And also, we have oil. So, oil is, uh, you know, oil prices influence inflation. So, higher oil prices globally will, in, you know, influence, um, uh, higher inflation prices globally, right? So, and it's [clears throat] best to keep an eye on oil and if oil maintains around $90 a barrel, maybe even goes a little higher, then inflation expectations are likely to uh, increase. Therefore, central banks around the world actually may start to to try to get ahead of that and look for, uh, uh, rate hikes and look to implement rate hikes. So, I think overall though, in terms of risk sentiment and uh, also looking at, you know, the front pages of Bloomberg, um, we don't really see much of the market reacting to any kind of risk off sentiment. And even though we do have a story here, uh, which is kind of spoken about earlier and, um, uh, talks about what best since economic isolation of Iran could look like. So, this the US is switching tactics and looking to, it says they're looking to squeeze Iran with unprecedented economic pressure despite the country already being subject to naval blockade and thousands of sanctions. Um, it doesn't look like the market really is taking that into account for now or even pricing that in. Possibly in oil we might we might see that first, but if the market starts to care and a switch to maybe a bit more of a risk on environment so it's off environment and a bit more volatility, we'll see it in the VIX. But for now, it does look like we are in a risk on environment. Therefore, in Forex in Forex land we are looking at really rate differentials and really the carry trade should prevail for now. That that kind of trade idea. And so when we're looking at interest rate probabilities for the major central banks for major ones the Fed, the ECB, the Bank of England and the Bank of Bank of Japan. It does look like the ECB and the Bank of Japan are looking at hiking rates and the BOE and the Fed are looking at holding rates. But just because the Bank of Japan are hiking rates doesn't mean that automatically that they should it should strengthen, right? There is something called the carry trade where you're looking at rate differentials. So even though they you know the Bank of Japan may hike 25 basis points to 1.25% the question really to ask is that is it is that enough to attract you know investors out of a higher yielding currency like the Bank of England and the the Fed into the into into into yen, right? To get that return. And the answer at the moment is probably not especially in a low volatile environment. So yes, rate hikes typically usually do strengthen a currency, but there are nuances. But I'll get into those in a little bit. So these are really the the probabilities as well. Pretty much the ECB hike has been kind of priced in and the Bank of Japan although it's a higher probability than a hold, Yeah, still some room to the upside in terms of the rate hike being priced in. And so um looking at the the charts and looking at the equally weighted dollar index. So the weekly sorry the index dollar index right looking at this probably have a demand zone here. And demand zone here technically. And really what you're doing is you're looking at the index to get an understanding really of of what the dollar and other currencies are doing against each other right equally weighted. So this is the dollar dollar strength or weakness against the euro the pound the yen the cad the Australian dollar New Zealand dollar in the in the in the Swiss franc and seeing how the dollar is is doing against those currencies right equally weighted. So fundamentally though the dollar is not doing great in the short term. It says here traders pair bets on fed rate hikes on inflation outlook. So bond traders stop fully pricing in a Federal Reserve interest rate increase this year amid a a retreat in oil prices that reinforced positive sentiment on inflation outlook. The Treasury market rally trimmed yields across maturities such as by as much as six basis points with those in the 30 year sector declining less in the US government sold 25 billion of new bonds in auction. So the market implied chance of a fed hike in September ebbed to less than 40% and the December contract priced in about 23 basis points of tightening indicated it is still seen as likely highly likely even if some doubts are seeping in that. This was an article from the 13th but I think since then, um, uh, the the the odds really have kind of come out and uh, you you see it here that the in the short term, it does look like the the the market really is more pricing in holds than hikes at the moment for the US dollar and that is really the reason why you're seeing the dollar on on the weakest side for now. So, um, I think the dollar in the short term is more of a sell than a buy. Um, and so, looking at really where you can kind of look for confluences on sells, I would say if I don't know whether prices would really kind of get up here, but there is a little bit of a mini supply zone, not the best supply zone in the world. Um, but if this starts to if the dollar starts to break down a little bit past this demand zone, then that becomes a stronger area of supply and then any pullbacks into that zone, I think should be looked at as a confluence sells. So, if prices go into a supply zone on the dollar index, then what you're looking for is dollar shorts on, you know, the pairs, for example, like the the euro dollar or the dollar yen or the pound dollar, for example. So, this adds confluence to really the trade and that's how I use the the the indexes is to understand when a currency is either cheaper or expensive against, you know, the number of currencies and then I'm looking for either sells or buys depending on my fundamental direction. So, for now, although the dollar isn't, you know, there are supportive factors for the dollar, it has got, you know, a nice carry in terms of, you know, higher interest rates. I do think at the moment though that the dollar is likely to be sold rather than bought unless, of course, there is some sort of inflation data that shows and that proves, I guess, that the interest rates aren't necessarily sufficient, right? So, they're being held at the moment and um you need inflation evidence that they should be really hiking rather than holding. So, so yeah, the dollar, I think I'm leaning on the sell side rather than the buy side. Although, technically, you could look for buys, but I'd rather wait for a pullback to look for a sell. Uh the euro at the moment, zooming out a bit, we can see here the euro, I think, should be more on the buy side. Um did look for buys. So, we've got some demand there. And um yeah, looking at this from a uh from fundamental perspective, it says here, "Resilient Europe turns into a winning bet for money managers." And it says here, "Investors are flocking to Europe stocks and bonds drawn by the best earning season in nearly 4 years and economic momentum is picking up, but remains cool enough not to trouble rate setters that the European settlers at the European Central Bank." And really, that's, you know, the maybe the key to this. But, you know, we saw that really the Fed Sorry, the ECB are looking to >> [clears throat] >> to hike rates. And at the moment, it does look like with dollar weakness, Europe is tends to benefit and the euro does tend to benefit from any kind of um uh dollar weakness. So, if the dollar continues to weaken, money typically goes elsewhere. And really, first one of the first uh currencies, major currencies, would be the euro. So, if we see more downside uh to um uh the dollar, then I would expect really Europe to continue moving higher, right? So, wherever there's a pullback there, I'd look for a buy. Prices go higher, then pull back to a zone, maybe somewhere around here, then I would look for a buy trade again, right? So, um for now, I think my bias is to the upside. There is um kind of a headwind though with the euro, and it says here that the uh US selling euros for yen spurs geopolitical risk, BlackRock says. So, um we'll get onto the yen in a minute, but it says here that the US's decision to sell euros to support Japan's currency without warning euro policymakers is adding to geopolitical risks and further dimming the appeal of long-maturity government bonds, according to BlackRock. So, it says here while the yen intervention is unlikely to hurt European government bonds directly, the surprise maneuver shows countries are becoming uh a little less cooperative, uh according to James Turner, head of global fixed income EMEA at the um US asset manager. Now, if the you know, the sell pressure basically on the euro, if there's another intervention in terms of um yen intervention to try to uh strengthen the yen against uh you know, the uh the market. And so, that will likely and could likely weigh on uh the euro. So, although I'm a buyer of euro of the euro, you could see moves on on the euro move to the downside um if uh the uh there's any more uh US and Japan-led intervention, right? So, that's really more of a headwind, but all things being um all things being equal, I think the euro should have um more upside potential, even if it pulls back, you know, I think there should be really buying opportunities. Um I'm looking at buying opportunities, the pound. And the pound really has kind of rallied. I've changed my tune on the on the pound over recent weeks in terms of in terms of buying and the data really has supported that. And so we see here we've got a bit of a demand zone. Right? And prices did pull back to this. Not only we had demand but a level of resistance turned potential support. So the last week or so I was saying that the pound could be actually a decent buy and what we did see was some actually some data come out and it says here heatwave and World Cup hand UK economy a surprise boost. So it says here the UK economy expanded in June with GDP rising 0.3% over the month helped by sunny weather and World Cup football. So economists expect growth to moderate in the coming months though as impact of higher prices and borrowing costs filter through to households and businesses. But in the short term I thought that the the pound was a decent buy and you'll see that really on the a couple of trades that I took. Well, actually I exited the the pound CAD trade but I'll show you the the pound New Zealand trade and that actually worked out all right and it's worked out so far. So so the pound I think you can look for both buys and sells. There are reasons still reasons to sell but I think in the short term the short term sentiment for the pound I think is likely to be on the buy side potentially on pullbacks. Although this week will be pivotal for the for the pound as there are several data. I think they got unemployment data coming out. I think they actually even might have a CPI coming out I think if I remember correctly but there's some market moving news for the pound. So although I say yes the pound is likely to be more of a buy than a sell. I think there's actually an opportunity to uh short the uh pound if the data comes in disappointing this week. So, technically, you know, you don't I don't really want to, you know, buy at highs or sell at lows. I want to buy at lows and sell at highs. So, at the moment, the uh we can see that we're at highs. So, the opportunity would be to sell, but that would have to be um supported by uh the fundamental data. Although [clears throat] my overall bias is to buy the pound um for now and uh going uh into the week with the yen. And the yen has been disappointing after this, you know, massive uh move. You know, with uh intervention, which was supported by uh the US, we've pulled back to pretty much uh you know, halfway, right? Fair value and continuing to uh to drop. And um one of the uh the main reasons uh for this, BlackRock uh Rider Wright Reader says that the yen yen's rebound hinges on uh BOJ hawkishness. So, it says here, "Supporting the yen will take more than government intervention and will need hawkish signals from the Bank of Japan," says Rick Reader. Um foreign exchange intervention is not uh the most durable path to a yen rebound, Reader says. And Japan's benchmark rate compares with Federal Reserve target range. And Reader said he sees another increase in September, though the central bank may delay the decision to December. So, really, unless the um the Bank of Japan start to get hawkish again, we could see some moves to the downside continue, you know, grinding to the downside, right? But what that would really do is just that would cause and force maybe the uh um the um the US and the uh and Japan to start to intervene again, right? So, they're clearly going to defend this level. They defended it, you know, once already and then they let it go to get a little bit cheaper and they defended it here. So, you know, anywhere around here with just a little bit cheaper, they're likely to defend. Also as well, 160, 162s are seen as a bit of a level on the on the dollar yen. So, if it does continue to grind lower, we should see really more more upside, but I'm going to I'm going to still have a little bit of a of a long bias on the yen. I think I don't know whether, you know, the yen is going to There's no really no levels to really kind of trade it off. If you're looking at maybe support and resistance, there might be somewhere maybe around here where you've got a level of support, resistance, bit of support there, bit of support there. We could see prices maybe go down to around here, but if we get down to these lows again, I would look for some more buys on that on [clears throat] that yen because uh we already know that they're looking to defend this level. So, yeah, that's where I'm I think you can look for buys or sells on the on the yen, but even in the short term, even if I wanted to be a seller of the yen, I would still have to wait for prices to move, you know, to the downside. So, I'm going to lean more more on the on the bullish side and take my chances to try and look for buys on the yen with that intervention threat. Um also, yeah, so that's it basically. So, just a bit of a recap. So, the dollar for me should be more leaning more sells than buys, the euro more buys, the pound more buys. Although this week will be pivotal for the pound depending on the data and the yen, although I definitely understand the weakness to the weaker side, the carry trade uh is working against the trade idea. I [clears throat] think the uh uh opportunity is more to the upside than any uh downside technically. And so, it makes it a lot easier to now look at the pairs fundamentally. So, we see and and establish really a direction. And so, we've got demand zone here. I would look for buys on the euro dollar. So, any pullbacks into a decent zone around here should be a decent buy. Uh So, we've got a level of support there, bit of support there. It doesn't look like support here. So, if you're looking for a trade in the in the demand zone, that should really be the uh the area, the 115, you know, around that round number there. Or just above it. So, that's what I'll be looking for on the euro dollar yen. I still think the move is to is more to the downside, but in terms of an actual setup, can't really see any setups for now. There's uh supply all the way up here. Um and even if you're looking at this as a as a bit of an a bit of a range, right? Meaning uh bit of an auction where really towards that fair value. So, this is really where the expensive area is. It's a cheap area, and then we're around fair value. But for me, there's really no um no setup on the daily time frame. Uh the pound dollar again grinding higher. Grinding higher. All right. So, any pullbacks, if I'm looking to be a buyer of the uh of the pound, then any pullbacks into that zone, I think should be decent. Now, there is an opportunity to look for shorts on the on the pound, but I do think that if you're looking for a sell, you could look to >> [clears throat] >> short this. Right, but I think there are better currencies to to short the pound against. For example, the euro, right? Or even the yen. So, if the if the if the data comes in this week, so we've got this week we've got for the pound we've got unemployment rate, we've got inflation rate, and also got the S&P Global. Yeah, so we've got a lot of data. So, this will determine whether the um the pound continues to be a buy fundamentally or whether upside is capped and we see a bit more downside. So, let's see what we see this week. But, as it stands, if that data does come in positive, then I think the pound uh should be a buy on pullbacks. Euro pound at the moment, still in this trade. Got a very small position and I nearly got stopped out. I think I trailed my stop up to around here. So, um But, yeah, the the euro pound, I think really should be um it'll be a difficult trade. And again, I think if the if we see any kind of pound strength, um then I think I'm going to definitely exit this trade and just take this maybe just let a trailing stop me out. But, ultimately, um you've got two decent currencies, I think. So, not really too interesting. I wouldn't be interested in taking any more trades, but the trade that I'm already in would have to move to the upside based on any kind of pound weakness. But, if you are looking for a trade, then I think really the uh the two areas to look for a trade would be actually where it is now. So, that's uh supply and of course some demand here. So, we're anticipating some pound weakness. In fact, you can look for uh a trade this week. Right now, as you've come down into this demand zone, so this could actually be quite nice for uh some more upside on the uh euro pound. Um and the euro yen, again, the yen pairs are a bit um in terms of setups, not really much setups going on on the yen pairs. Got to be a bit patient for a setup. But, um But, yeah, I think the um the euro should really have it in terms of uh in terms of being the stronger out of the two as they are uh hiking rates and they've got a higher interest rate. But, again, it depends on whether intervention comes in um and whether that selling of the euros really does affect the uh the euro. So, um yeah, I think again, not really a pair I'm really that interested in, but if you are, then I think there is probably a level, maybe another demand zone right here. And then, you do have a level of support and resistance around there. So, within that level of demand, which made higher highs, higher lows, price is if it pulls back, you're looking for a sell trade here. I'm sorry, buy trade here. If you're looking for a sell trade, then I think at the moment the only really sell trades on on daily supply zones going to be really up at this this area here. So, we'll see what happens um with the euro yen. And the same pretty much same thing with the uh with the pound. There's not really no kind of setup on these uh on these yen pairs. But, if you are a seller, then you have to wait for prices to move up into here. If you want to be a buyer, then you're looking at again one of these zones. Probably around there is a decent area to look for a buy trade. Uh looking at gold and gold again benefiting really from dollar weakness. We have pulled back up into this supply zone. But if you are looking for continued buys based off of dollar weakness, then you're looking at these areas right here. But the minute we get any kind of dollar strength, then I think um we're looking at a bit of a sell. And actually technically this level here I do uh quite like it. Nice fresh area of supply. Um but a move to the to the upside would be decent. And um we see here actually it says here gold needs $4,400 as traders weigh Fed interest rate path, right? So it says gold edges towards $4,400 an ounce as traders weigh the Fed uh interest rate path after the economy's main engine showed signs of cooling. The latest US data showed declines in both consumer sentiment and retail sales helping ease helping ease fears of an imminent rate hike. And so um and so again, as I said, the uh uh gold is really moving based on uh interest rate expectations. So um a hold would likely mean continued upside. Or even if there starts to be cuts, but if inflation starts to come in in terms of um you know, oil, then actually this could be a decent sell. So uh a decent setup technically, but you'd need uh the dollar to start to strengthen and therefore gold starting to weaken. And the S&P again making new highs um on the uh Thursday, Friday. And again this is more driven by the fact that um the Fed are looking to hold rates a little longer. Any kind of hikes and money will typically flow really out of the the S&P, but as we've seen any any holds um the market will still or start to look for more of a risk on and more of a return on investment, right? So, any pullbacks probably into that zone is still a bit rich for me, but um if you can get a decent pullback, then that would be nice. So, um it seems like as long as there's a weaker dollar and the Fed are holding rates, we should continue to see more highs. Um also as well, just be careful of the of the AI narrative, right? The AI bubble. If that could um if that starts to pop a little bit or deflate, then of course, we could see a move to the downside, but ultimately, I do think that we're probably likely to see more upside than downside over the medium term. Looking at trade updates, so again with uh with the [clears throat] euro pound in the last last video that I created, I went over this trade, took profit of 80% off around a one to one, which is around here. All right, and then basically trailed up my stops, so my stop actually is around here now. And as I was saying previously, the uh um you know, nearly got stopped out on that pullback, but overall, this is a profitable trade because I've taken 80% profit off. I've only got like a 20% left. It's a very small position which I'm trading up, which really I can't really lose now anyway. So, if we get some data out this week, which is supportive for this trade, bearish for the pound, then of course, uh this should continue to move to the upside. If not, and I get trading stopped out, then that's fine. It's a profitable trade. Uh the pound CAD, um I ended up taking actually um the profits off this cuz I thought that the CAD was going to strengthen. I said this uh again in the in the last video, and um so I ended up taking profit around uh around here, around this area here. I think it was like the uh as the market opened, it was around these highs. Uh ended up just taking that profit off. Ended up getting in two positions, right? Um took profit on one, and then took the full profit on the other. So, this ended up being a uh profitable trade. And then the new the new trades I've taken is ones on the pound New Zealands, and uh this was uh in the in the in the group, right? Where discussion room, where uh I posted this, and it says here, I said, "Warning everyone, I've gone long on the on the pound New Zealand and short on the New New Zealand CAD." The New Zealand had some employment news that was disappointing, and so the figure reduced the need for immediate hiking. Therefore, the market is likely to be priced the New Zealand dollar in the short term. The New Zealand dollar index was expensive, so I expect a pullback. So, uh this was really the trade. The setup was a uh pound New Zealand uh was a stop hunt, and we also saw a stop hunt on the New Zealand CAD, right? So, I was looking to uh to buy the uh the CAD. So, um but in terms of this trade, uh we ended up entering around here. Again, hit a nice uh one-to-one trade, but um I ended up getting in on three uh positions. All right, so as prices pulled back there was a buy there and prices pulled back there was a buy there. So, this trade here ended up hitting a one-to-one. Uh, the next trade ended up hitting a one-to-one. And then the last position, which was around here, uh hit a one-to-one. I did take uh some some uh some profits off again, another 80% off of that one and trailed up my stop. I think my stop somewhere around around here. So, um two positions and then one uh I've taken profit off. Um, and uh we'll see what happens this week. Uh, also as well we've got the New Zealand CAD. And again, New Zealand CAD was a really nice really a textbook stop hunt. Right [clears throat] from this level where you got a level there, level there, nice stop hunt. And um prices ended up, you know, dropping unfortunately. I only ended up getting into uh one uh position on this. So, that was the entry was like there. Prices didn't pull back to get me in into multiple positions. So, this trade ended up being again when it reached the one-to-one, which was around here, ended up getting uh taken off around 80% profit on here and then um just letting basic letting it run, right? So, uh the rest of the smaller position um I'm just letting run and I'm trailing it down as well. For my to my stop somewhere around here. So, again, I've locked in profits and um taken profits. So, this is also [clears throat] another uh profitable trade. So, uh that's it for the week. I hope you found the analysis useful. Don't forget to like, subscribe, and share the videos with your fellow trading colleagues. I hope you have a great trading week. All the best and take care.