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

Hi, my name is Leon Road currency trader and trading coach at trading180.com and welcome to this week's supply and demand Forex, gold, and S&P fundamental and technical analysis for the week ahead starting the 2nd of August. Hope you all had a good trading week and getting into the week ahead and this is from tradingeconomics.com and they say that the start of August will see the war between Iran and the US continue to uphold the uncertainty in global energy prices and consequently the inflation outlook. A busy week of economic data will be headlined by the US jobs report and other labor data in the JOLTS and ADP report. ISM PMIs, factory orders, and the trade balance will also be featured for updates on industry and tariffs. In Europe, industrial production among the latest Eurozone states will unveil the impact of higher power costs while Germany will post its trade balance PMI results and the trade balance are awaited in China. Meanwhile, Japan will release its wage data and industry surveys are due in Australia. So, uh quite a things few things going on this week, some market moving news across the board. So, looking at risk sentiment overall and we're going to look at the VIX, the S&P, gold, 10-year Treasuries yield, and uh oil. So, starting off in the VIX, top left-hand side, and what we see really is uh the the VIX, which is a volatility index, but it also measures uh risk sentiment and typically risk off is seen as a bit of a safe haven play and if the VIX starts to kind of rise above the 20, then we start to not only get a bit more volatile, but um we're we we should be seen as a being a bit more risk off environment for now. We I think we definitely more risk risk optimism. We did have a bit of risk off earlier in the week on the Wednesday, uh, but things have calmed down now. So, uh, when we are below the 20 and kind of staying in staying sustainably below that, then uh, the market is really looking at in Forex land anyway, rate differentials, um, and the carry trade, right? It's all about the yield return. Um, any uh, yielding assets um, and looking forward to put more risk on the table when it comes to looking for a return. It's the reason why we see the S&P uh, moving higher during low volatile environments. So, um, as we've, you know, come down this week from Wednesday on the uh, when the VIX has kind of gone up, so actually in fact, let me just show you. So, as the VIX uh, has gone, you know, down from Wednesday, right? We've seen the S&P move to the upside, right? So, they're quite uh, closely uh, correlated. Or inversely correlated. So, um, S&P at the moment, uh, you know, uh, had the had a little bit of worries. Matter of fact, it was really about the uh, the AI trade. So, it says here, uh, "The biggest Wall Street rotation since 2020 shows AI crowding risk." So, Wall Street uh, staged a tentative recovery from a wild week of the AI boom with a rout in technology shares and a surge in long-term borrowing costs followed by a decisive snapback. So, the week's turmoil was triggered in part by losses on leveraged AI bets by Situational Awareness, a hedge fund that was forced to dump public equities into a falling market. Investors are left wondering whether the week's events are a technical uh, accident or a glimpse of a market becoming less forgiving of Federal Reserve policy makers and the assumption behind the AI investment boom. So, uh, yeah, the the S&P um uh being a little bit on the mixed side um this week and then a bit of recovery. And that recovery was also not also aided but just by the AI boom, but um the fact that um there was a bit of uh Fed credibility from uh Kevin Warsh who uh we'll get into it in a sec, but was a little bit seen as a little bit on the dovish side. And so that can help uh the S&P as well because uh rates being kind of lowered or held uh does help the S&P move a little bit higher. When you have rate hikes and a hawkish central bank set um you know, uh indices indexes stocks certain stock stock indices don't necessarily do as well. Um and then you've got gold. Uh gold again a really kind of a being a little bit of an inverse to uh the dollar and in a um risk uh on environment where you got lower volatility uh gold doesn't do so well, right? So, um you're seeing gold at the moment over the last uh month. If you're looking at the last month, we're pretty much around these uh the 4,000 area around these more towards the lows below fair value. Um and then you've got the two-year treasury which is grinding slightly higher on the Friday. Got a bit of a bit of a move to the upside. And uh again, this is more expectations of a potential rate hold and the potential of a rate hike, but uh at the moment the market is assigning a bit of a lower probability to rate hikes uh at the moment. And then we've also got oil. Now, oil uh you know, reached $100 a barrel uh last week and then we've kind of pulled back a little bit and then you know, grinding a little bit higher. Uh what assists with this is that the hedge funds add bullish bets on oil at fastest pace since March. So, hedge funds boosted bullish wages on US oil at the fastest pace since March as supply disruptions are set to boost demand for American crude. Money managers increased their net long positions on West Texas intermediate Sorry, intermediate crude by 21,402 lots to 108,307 in the week ending the uh July 28th, the biggest jump in about 4 months. Speculators now hold the most bullish stance on US oil since mid-June driven by supply disruptions from Iran in the Red and Black Seas. So, what that's really saying is that likely to see uh potentially continue to see higher oil prices, right? Uh or at least uh you know, around the '90s to '80s for a sustained period. Whether it go higher or lower is anyone's guess, but at least uh the hedge funds are thinking that oil prices are likely to remain elevated. So, overall, I would say um and again, looking at maybe the front pages of Bloomberg, which really doesn't really show anything to do with uh the Middle East at the moment. It's not necessarily in in the main uh focus, and neither is uh Reuters um at the moment. It does look like the market is more in a risk optimism. A bit more risk on than risk off at the moment. Of course, this could change, but right now it does look like we're looking at, you know, differentials, carry trade, yield return uh strategies, and the currency pairs, and and currency trade ideas. So, uh moving on to the um the index and looking at the dollar index. And the dollar index uh dropped this week, and this was really mainly due to the um You've got the dollar One second, let me move that over. Uh you've got the dollar. It says dollar long's worst week in over 3 months amid Fed doubts. So, uh the dollar finishes worst week in over 3 months on concerns the Federal Reserve won't move move forcefully enough to contain inflation. So, again, there was uh FOMC this this week earlier this week and uh Kevin Walsh was seen as being a little bit on the dovish side. Um it says here the greenback's retreat reflects angst over the Fed's credibility with Chair Kevin Walsh facing scrutiny after the messaging stoked worries that the central bank may hold off on raising rates. Efforts by Japanese authorities to shore up the yen weakness also added to pressure on the greenback with the yen rising more than 1% against the dollar and euro on Friday. So, uh the dollar I don't think is like materially weak. I don't think it's like structurally uh on the weak side. I still I still think that the dollar could be a buy. I just think that in the short term now, it might be a bit of a tougher buy uh simply because of the uh short-term sentiment. I think the dollar needs a bit of uh data in terms of uh inflation data to kind of uh get it going. If if the inflation data comes in and it supports uh higher rates and um forces the uh Kevin Walsh, the chair, Fed chair to be a bit more on the hawkish side, uh then I think the dollar can kind of stabilize. Um and maybe the bit of a reversal also. We do have FOMC this week, so it makes sense that if we do get a good, you know, jobs report uh this week and uh good economic news, I think PMIs are coming out, then that can also help to stabilize the uh the the dollar. But, there's one thing that's going to uh is a major thing at the moment that is uh also um hurting the dollar. and hurting, but it's causing the dollar to depreciate, but I'll get into that when we talk about the yen. But overall, I think the dollar is still a buy, although of course that massive drop would suggest that, you know, likely more selling is could, you know, continue. Uh but I think if the the dollar moves, um the dollar index anyway moves, you know, anywhere around these lows and continues to drop into the week, I wouldn't be surprised, but I would prefer actually a decent buy, an opportunity to potentially buy, and then obviously with uh the confluence of some economic data uh that would cause the dollar to appreciate. So, my bias is to look for more dollar longs than sells, and even if even if I wanted to be a seller, uh I wouldn't be a seller at these lows, right? I'd have to wait for a pullback into a level before going short. Um the euro, so the euro pulling back, and actually I think this is a decent opportunity to look for a buy trade. Um Um the main reason is that, let me just make sure we got some demand zones here, is that we've got uh the euro area inflation strengthening as US-Iran strikes boost oil. So, it says here that the euro area inflation picked up in July after the collapse of the US-Iran ceasefire boosted oil prices, reinforcing expectations that the European Central Bank will need to raise interest rates again. Uh consumer prices um increased an annual 2.9% after 2.8% in June with energy surging 10% and a gauge for services that and one excluding volatile items also accelerating. Economists and investors predict a hike in September with money markets seeing a 90% chance of a quarter point increase in September and pricing 42 basis points of hikes by year-end. So, that is, you know, pretty hawkish for the euro. And as long as the economy is seen as um as being supportive, which it is at the moment, I would say that this could be actually a really nice opportunity to look to buy the euro. With a weaker dollar, um you know, buying the euro um would be uh would be probably a bit more favorable, I think. So, buyers, I think, for the dollar for the sorry, for the euro right now. You could look for sales, if you wanted to, probably somewhere up at these highs, but I would personally look for more uh more long trades within the coming week. If it even if it does move down a little bit more, I think it would have to be driven by a really major catalyst, uh you know, weak data, but I think the euro should hold up um this week, uh even if it pulls back, at least a decent buy uh for the euro. That'd be my preferred bias. Looking at the pound, and the pound this week, uh bouncing off of this demand zone, technically. And there's also a level of sup- resistance turn support around here. Also, as well, you've got um probably some demand so I'd say it's some supply around here. So, let me change that to green. All right, see what we've got in the demand zone there. Another area of demand, probably around here as well. But, uh the pound this week, the Bank of England came out, and uh it says here, "Hawks appear isolated as deputies deputies shift ground." And uh it says here that the Bank of England rate-setting committee has a growing divide between its hawks and doves, with the hawks looking increasingly stranded in their push for higher interest rates. Uh deputy governors Claire Lombard Daly and Dave Ramsden, who had previously struck a hawkish tone, have shifted towards a more dovish stance citing limited second-round effects from the energy shock, and the committee now has a solid majority in favor of holding interest rates steady unless upside risks domestically and abroad materialize with markets scaling back bets on rate hikes and pricing in just one increase this year. So, I think in the short term, I think the pound could likely be a bit of a sell, right? Um the the the the uh data when it when it came out was a little bit uh mixed little bit of mixed messaging. They had uh some analysts saying it it looked like it was on the hawkish side because you had an increase an extra governor vote for uh potential rate hikes, which that's what I initially assumed, but now it does look like when the once the dust has settled, in fact, uh that there's likely to be maybe a little bit of weakness. So, you can look for a buy right now on the uh on the pound if you wanted to, but I think the pound is also a potential sell, maybe somewhere up at these levels if prices pull back a little bit and maybe even higher. So, if if the uh if the pound index doesn't move around these areas here or to the upside, um I will be looking uh for some sells um in terms of uh you know, monetary policy. But then again, um if if you're betting on maybe higher oil prices, then actually the pound could be a decent buy, but I'm leaning towards sells. You can look for buys at the moment, but um I think uh if I'm looking for buys, then it wouldn't uh the buys would be quite short-lived. Um and I'll definitely be looking for some sells around here if oil remains on the lower side. >> [snorts] >> And then Then have the yen. And uh in last week's video I was saying that you could take probably a small position on buying the yen if you wanted to and look at, you know, what the what's what happened, right? Situation was really nice. If you managed to time it right, although it was still a surprise. I was actually waiting for the um uh for the for the uh announcement to come out and I was pretty looking to see if they were dovish and I was thinking that they would likely be dovish, but actually they would they actually were were on the hawkish side because of how weak the the yen was. And so we see this huge move. This was also driven by not just a hawkish um Bank of Japan, but really primarily by the um interventions. So, there was uh it says here the BOJ data point to yen intervention of around So, it yeah, BOJ data point to yen intervention of around 53 billion dollars. So, to Japan likely spent around 53 billion dollars intervening in the currency market on Thursday to prop up the yen according to a Bloomberg analyst of central bank accounts. The operation was estimated at around uh 8.45 trillion yen, which would be likely be the biggest ever intervention on a single day by Tokyo showing the determination and increasing difficulty of for authorities to peg back speculators betting against the yen. The Japan's currency strengthened as much as 3.5% against the dollar in New York trading on Thursday, its biggest intraday gain since December 2023 after the yen intervened to support the currency. So, um it does look like they did intervene and also as well, really the kind of the icing on the cake on the Friday was that it says here Besant joins Japan to help reserve um sorry, reverse months of yen losses. So, uh it says here the US joined Japan in engineering a rebound in the yen with the currency quoted at five at 157.4 uh to the dollar, the strongest since early May. The sharp gains are fueled by a combination of direct purchases of the yen calls by officials to banks and that trade the currency and jawboning from US Treasury Secretary Scott Bessent and Japanese Finance Minister Satsuki Katayama. And it says here that the Japanese authorities bought yen and sold dollars during New York's trading on Friday and the US Treasury Department sold euros to buy yen on behalf of the US Treasury Department, according to reports. So, uh why would the um you know, Scott Bessent, the uh New York Fed chair, um help and assist with uh with trying to keep the Sorry, the yen. Uh you know, uh try to appreciate the yen, right? Try to keep the yen from devaluing. And what's come to light is that it says here, it says a failure to arrest the drop, right, in the yen would have impact that goes far wider than Japan as turmoil in the nation's financial markets tends to spill out globally. Volatility in its government bond market this year has flowed through into Treasuries, drawing the eye of Bessent. And the more that the yen's depreciation gives Japan an advantage in trade with the US, the more likely it is to uh President Donald Trump. So, it's more economic, [clears throat] right? There's an economic element to this in terms of imports and exports, but the next uh paragraph will kind of uh cement everything. It says here that yet the rub for Trump the Trump administration is that if Japan is left on its own to defend the yen, Tokyo may have little choice except to sell down part of its holdings of treasuries to fund more currency intervention, which would have a negative impact on US borrowing costs, right? So, that really is the key. Right? If you want to understand everything, that's the key. So, really the the the you know, Bessant had no choice. And the US had no choice but to assist the Bank of Japan and the Ministry of Finance because the of the negative effects and the negative impact that intervention would continue to have on US borrowing costs, interest rates, right? So, that's really the reason why you're seeing um uh uh Scott Bessant, right? Help and cooperate with the with the Japanese authorities and and finance the Bank of Japan and the Ministry of Finance. So, this also helps the US, right? Um now, I think I was saying, you know, before last week that this intervention here, I wouldn't be surprised if prices went to the downside. Now, I still kind of believe that, but I would wait for the dollar-yen to maybe reach the 155s before maybe we start to see some sort of some sort of reversal of fall the yen. Cuz at the end of the day, um I don't think that the uh yen, in terms of its attractiveness, higher rates or higher rates is is really attractive for the market. The dollar still has way higher rates. The yen is still probably going to be used as a funding currency. And although Ueda was bit on the hawkish side, uh I don't think he's hawkish enough. So, I do think that this This likely to, you know, may it could potentially move higher, have a bit more legs, but ultimately I do think it might be short-lived. So, there's an opportunity to look for short trades within this zone. But, if you're looking for for a long trade to buy at highs, personally I >> [clears throat] >> I don't know I don't like doing that at all. But, uh if it does go higher, then I would look for sells probably from maybe into maybe pretty maybe leave next next week or see what the dollar does next week before I start to look for any sells on the yen. So, I'm a bit neutral on the yen for now. So, overall looking at the dollar, I'm still long dollars. My bias is long dollars, although this week will be a little bit of a test. I will probably be a bit more patient and wait until what happens just before FOMC before getting involved in any long trades, see how prices react. If FOMC comes out negative, then I will look for start to look for some sell trades. I think the euro should be a buy. The pound, although you can definitely find reasons to buy the the pound. It wouldn't be a bad idea to to buy the pound technically. If it does pull back up to any of these levels, I would look for I would look for short trades. And the yen, I think I'm a bit more neutral on. I'm going to stay out of the yen and just watch the dust settle before I make a decision on any directional bias. So, looking at the euro dollar at the moment, the euro strengthening against the dollar. And if you are looking for any trades, I'm not really looking to trade the euro dollar anymore. Well, not for now. I would say probably you're looking at a move up to these highs before going short. If you are looking for a long trade, you'd have to wait for prices really to kind of come back down to the 138s. Now, some traders will trade this level of you know, support and resistance. Personally, I'm not really a support and resistance trader solely when it comes to pairs. So unless there's a level of maybe some sort of CPR if you know about capture pain relief trades and or stop hunt, I'm not really looking at going long or short unless you have a I think although the dollar is weaker in the short term, I don't think it's structurally weak. I don't think it's a long-term weakness for the dollar. So I think there's better pairs out there and fundamentally so I will leave this pair alone. Dollar Yen as I was saying earlier, I think the goal is and I've read some reports that 155 is where there's a potential target for uh for the for the Bank of Japan and and the US. So if it starts to come down around here, then I think that's really where the buy is. So into next week, we could see some like this you know, some momentum still continue to take it to the downside and then this is you know, around the 156s, 15650s, 155s. That's where I'll start to look for the potential for a buy into the coming week. But I think overall the dollar still in my opinion is more of a buy than a sell over the Yen. Pound dollar this pullback actually is quite decent. I would look for a potential sell in this. I think dollar should still be a buy overall. But again, I think it'll be determined by what happens this week as we go into the the FOMC as you're going to Friday. Also not FOMC, sorry, non-farm payrolls. It's always the first Friday of the month. So we'll see what happens. I wouldn't be surprised if prices came up up here and in fact within that zone, I think this is a this area here is actually quite decent. It's a nice capture pain relief. So, if it does kind of pop up into this area here, then I think that's a nice area to look to position short. Um the Euro pound, I'm still in this trade which I'll go over a little bit later, but um the Euro pound I think should be really on the on the buy side. I think the Euro now um at the moment it does look like it's strengthening. Any pullbacks into a decent area, I wouldn't necessarily look for this area here, probably down into the 85 round number before looking at going uh long. The Euro Yen and I think the Yen against pretty much all currencies at the moment with intervention, you know, was always going to sell off. So, if you do get prices move down into further into these zones, you can look for a potential buy. I think definitely the Euro should be on the on the buy side against the Yen. I just think that at the moment with the intervention with the corporation, we could see a little bit more downside before we see some upside. And really again, the key to [clears throat] to to this trade I think is around the you know, the dollar Yen around the 155s before getting into any Yen trades. So, same thing with [clears throat] the pound Yen as well. So, the pound Yen, price action there's no level that's going to stand in the way of you know, fundamentals, right? And so, again, probably if we're looking at any kind of trades and you're looking at maybe a bit more downside, I think you'd have to wait for prices to maybe come down to maybe the underside of this you know, 2211 211 round number. >> [clears throat] >> before looking at going long if you're looking to buy the the pound over the the yen. And the reason really the main reason why you buy the pound over the yen is because of the carry trade, right? The the pound still has a quite a a higher interest rate advantage and so and the yen has a quite a low interest rate um uh interest rate disadvantage. So, from that perspective that could be nice. I think again the only really reason why you'd be a buyer of the yen is if the um the Bank of Japan get really really hawkish. But for now, I can't see prices moving really back up to um these areas for at least for quite a while. So, the only really opportunity would be to wait for the maybe some long trades and maybe a little bit lower. Um looking at the metals and gold and silver. So, looking at gold first and there was uh some uh news. It says here central banks bought far less gold than thought at the start of the year. So, central banks bought 57 tons of gold in the first quarter, 187 tons less than previously thought, the weakest start to a year in well over a decade. So, central banks demand recovered sharply between April and June totaling a net 289 tons, a record amount for a second quarter with Poland and China among the top buyers. It says here the World Gold Council expects central banks gold purchases to decline this year after a rebound in demand in the second quarter with the overall pace of purchasing likely to fall below 2025. So, that's interesting and I think overall because we are in a more higher um interest rate environment, that is having an effect on gold because in the end of the day, you [clears throat] know, you've got other safe haven assets like the dollar, like, you know, bonds as well, and then bond yields. Right, which pay a yield, right? Whereas gold doesn't. So, gold becomes less attractive as a safe haven play, or at least in terms of its status. And so, not to say that it won't be, but you know, it's it's not necessarily the preferred safe haven play. So, at the moment it does look like gold will be put under pressure. I think if gold does rise, it's really just as a function of maybe a bit of a weaker dollar if the Federal Reserve do hold rates, but overall I do think that the gold any any pullbacks as well as silver should be shorting opportunities, right? If gold pulls back, if silver pulls back to any of these levels, I think that is where the the path of least resistance is. And you've got the S&P, which again bounced off of um you know, this looks like this level right the right at the lows right here. Really kind of bounced off of that. Pinpoint accuracy. Um right there. And so, I think any pullbacks into that zone are likely to be bought as well again. So, there or even maybe just slightly below that. But also with S&P, the S&P prices are likely to be capped as well, because we are in a bit of a high interest rate environment. And if you know, inflation's come back in, the Fed starts to get a little bit hawkish again, then we're likely to be in this you know, this auction this range, which is what I've been saying over the past few weeks, maybe a month or so, that we're likely to see something like this. All right? And this is what is actually starting to play out. If the Fed are dovish, then you're likely to see prices potentially move to the upside. But again, that would just assume that the Fed are dovish because inflation is coming down and you know, and and oil prices there's a there's an end to the conflict or at least a ceasefire to the Middle East conflict. Um so yeah, that's really the the the path of least resistance. I think we're we're in that buy low, sell high. So you can sell at these highs and I think if prices do come back down to these lows, you can look to buy at these lows. Trade updates. So a few weeks ago managed to get in short on this stop hunt and again, you can go back through those videos and then I managed to take 80% profit off of only one position I managed to get into and then I trailed my stop down and this week that that remaining position, small position of 20% of the overall ended up getting stopped out. But ended up being a profitable trade overall because you know, my entry was here, right? And then my stop loss was here. So a decent trade on the pound dollar. The euro pound, I'm still in this trade. So again, I only managed to get in on one position, hit a one to one, took off 80% and then I only got 20% of that position remaining with my stop loss at the 85 round number. So hopefully we start to see more upside. The ultimate target is really I think it's like 88. There was a bank target that was saying that they think that prices can go to 88 cents. So hopefully that happens. It does actually start to look like it as you've got a a bit more of a hawkish European Central Bank and a less hawkish Bank of England. So let's see what happens with this trade. And the new trade that I got in which I'm likely to probably get out this week is the pound CAD. So, pound CAD this was a post that I had I had done in the in the group, all right? So, this was really the trade set up right here. You can see a few more things on the on the chart which I don't necessarily go into on the YouTube video. There's a There's a certain strategy that I use in conjunction with support and resistance, but ultimately this was before the trade. This was at 10:00 so before the central bank meeting and ultimately the the trade worked out, right? So, the entry was around here. I managed to get in on two positions, right? As prices pulled back, I was hoping for a hawkish Bank of England which actually did happen at first, right? Even though we've seen that they were actually the market is now interpreting them as being dovish. I think the initial monetary policy committee member voting, you know, being a bit more hawkish and voting for more high a hike cuz there was 7-2 and now it's 6-3. I think that's what pushed prices eventually, you know, to the upside, right? So, that ended up being a nice trade. So, when prices pulled back to this second position, I tried to enter at least into five positions. Once prices pulled back into that one, then I could go for a 1-2-1, get myself to at least a break even trade which is what happened and then I can now hold this position here. All right, and then basically trail it up. Now, I haven't decided to trail it up just yet. I didn't see this until this higher high being made until the market closed. So, what I will do actually is start to look to actually take profit or take the majority of profit off of this one because I do feel that the pound may be on the weakest side at some point and I think that the Canadian dollar actually can have a little bit of a resurgence. So, I think overall I'm going to leave a little bit of a position on, right a very small position of this one, maybe take off again 80% off of this position and then maybe have a little small position on trail to stop up and if it does move higher then fine, but for the pound CAD, I'm probably looking at trying to get in maybe somewhere around the the the this zone here. Sorry, 1 second. Right, maybe somewhere a little bit higher towards these this market highs if it can go up to these prices here. But if I see an entry to go short around here, then what I'll do is I'll take all my profit off and then try and look for a reversal. But with the reason why I'm not going to enter it just yet is because the pound actually as it goes is on the cheap side. What I need for me to get involved in that trade is for the pound to be on the expensive side. So, we need a bit of a pullback on the pound. You know, somewhere around here and then the Canadian dollar index needs to be cheap so that it looks like I'm buying I'm buying the CAD for cheap and I'm selling the pound at an expensive area. So, at the moment maybe I might just hold on to it. Matter of fact, I'm going to hold on to the trade and if prices do move up to around here, that's when I'll exit the trade and then look for a reversal on that pound CAD. So, that's where we are and that's where I am with my trades. Anyways, hope you found it the analysis useful. Please don't forget to like, subscribe, and share the content with your fellow trading colleagues and I wish you all the best in the week. Take care and until the next video.