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

Hi, my name is Liam Roca, 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 5th of July. Hope you all had a great trading week. So, getting into the um week ahead, and this is from Trading Economics, and they say that tanker flows through the Strait of Hormuz picked up sharply in early July. Energy prices sank, but long-term yields remain higher, shifting um monetary policy back to the market's spotlight. The Federal Reserve will release minutes from its June meeting to unveil insights on a divided FOMC. On the data front, the US will release the ISM Services PMI, existing home sales, and its full trade balance. The ECB will also release monetary policy accounts. Germany and Italy will uh sorry, publish industrial output data while Germany will join France in posting trade flows. A busy week of economic data in Japan will be headlined by consumer spending, machine tool orders, producer prices, and the current account at a time of pressure on the yen and JGBs. China will unveil its inflation rate. On policy decisions, the RBNZ will determine its interest rate. Elsewhere, OPEC will meet and define output levels on improved trade routes. So, uh a few things going on this week that should uh move the markets. So, getting into uh risk sentiment. An overall risk sentiment, looking at the VIX, S&P, gold, and the two-year Treasury yields. And looking at the VIX, um we can see that the VIX is really around the uh 16 area, uh below the 20, which is seen as a lower volatile environment but also more risk on a bit more risk optimistic and again that's kind of backed up when you look at the front pages of you know major publications like Bloomberg and you know they're going with the headlines that oil gas tankers cross hormones via Oman side route after U-turns and so with the Strait of Hormuz kind of reopening obviously oil um um is is is flowing through or tankers are flowing through um that means really that there's business is returning back to to to normal not necessarily it's going to be in normal in the next you know week or two but it's always a good sign when you have tankers flowing through right so um um you know it does look like the the fears and worries of higher oil prices are really I guess at an end for now anyways and de-escalation in the the the war in the Middle East right and the S&P is confirming that when we get the S&P kind of rising that is normally a sign that we could be in a risk on environment where investors are expecting they want higher return on their investments right so that's coupled with of course the VIX moving to the downside the S&P moving to the upside gold although gold is moving to the upside a bit of a pullback I mean kind of zoom out on on gold over the last maybe a couple of months we're seeing it's still really in this in this downtrend. And it's really just pulling back and I think the pullback's more based on maybe a bit of dot of dollar pullback really rather than any kind of risk sentiment. Um and then we got two year treasury yields when we look at the two year treasury yields, um you know, it does look like uh higher yields for longer at currently at about 4.1 4s, which is uh again, um kind of showing that bond market think that the Fed are likely to maintain rates at a higher level for at least over the next, you know, couple of years. Um and so uh the higher this goes, of course, the more we'll get um maybe the potential for uh rates to be hiked. But for now, I think we've we're getting into the data on FOMC, um uh sorry, non-farm payrolls on Thursday, um it looks like rate hikes have kind of been scaled back based on that data. So, um looking at the overall interest rate probability, uh short-term for the Fed, the ECB, the BOE, and the Bank of Japan, it does look like um the moves are really holds. All right, for the next meeting. So, the Fed have their meeting in July, July 29th. ECB July 23rd. Um Bank of England is July the 30th. And the Bank of Japan is July the 31st. And um definitely more holds are being priced in. But at the moment, it does look like uh the Fed there's a there's a 27% chance of a potential uh hike for the Fed. The ECB 28% of a of a potential hike. Um and Bank of England's um have a and the Bank of Japan have a lower probability. But of course, this is subject to change based on uh developing uh data like uh gross domestic products, you know, employment, uh especially inflation, all right, as well. And uh also as well, PMIs. Services and uh manufacturing. So, um at the moment, it does look like the Fed is still a little on the hawkish side, but that might be scaled back in the coming week depending on how the inflation data plays out. So, looking at the the chart and we look at this is the dollar index dollar index the equally weighted dollar index, right? And if you want to know why I use the equally weighted dollar index, there's a link in the top left I think or top right hand side of the video. Click on that and that I'll basically explain really how I use the equally weighted dollar index in my trading. But, this is just the dollar equally weighted in strength and weakness against the euro, the pound, the yen, the CAD, the Australian dollar, New Zealand dollar and the Swiss franc. And so, what I do is I look at the dollar overall um in terms of the fundamentals and then I establish a bias and then I'm looking for how the dollar is in terms of strength and weakness against all of the major pairs that I'm trading against and then I'm just really waiting for a pullback, looking for you know, value, looking for you know, fair value discounts on the dollar overall. So, we've seen the dollar kind of pull up the last few weeks and maybe month or two and we're getting a bit of a pullback now. This pullback is was due really to the jobs data and it says here treasury rally as jobs data oil prices upend Fed hike outlook, right? So, hikes are normally seen as supporting a currency and appreciating a currency and it says here US government bonds ended the week with lower short-term yields after June employment data challenged expectations for Fed Federal Reserve rate hikes this year. Falling oil prices contributed to the move by keeping downward pressure on inflation expectations while which have collapsed in recent weeks as the US and Iran moved towards ending their conflict and And market continues to fully price in a quarter point hike this year, but not before December compared with October previously with short-term interest rate futures pricing in about a 20% chance of the Fed will let the Fed will raise rates on July the 29th. So, um in the short-term due to of course the jobs data and uh the inflation outlook and oil prices, um really Fed hikes have kind of been maybe pushed back which is uh the market really just maybe pricing out uh rate hikes sooner rather than later. But again, as we've read the market is still kind of expecting rate hikes for now. So, as long as that does maintain that data supports that narrative, we should see uh the dollar be really a buy. Now, will it be a buy here at this level of resistance turn potential support or will it be further down? Who knows, but this is really an opportunity now if you're looking to buy the dollar, um this is an opportunity to look for maybe some buys um on the dollar and dollar crosses, right? So, if you're looking for if you think that the dollar is uh a better buy than for example the euro or the pound or the yen, then of course that's what you're looking for. You're looking for a cheaper dollar and on this index and an expensive um uh currency, right? Maybe an expensive euro or an expensive yen or an expensive uh pound, right? Um if you think that those currencies should be weaker than the dollar. So, ultimately that's really uh where we are and I think the path of least resistance is to the upside although um you know, recent data suggests maybe they're not necessarily aggressively hiking, I still think overall the dollar should be supported by its higher yields and uh economic outlook. When we look at the euro, again across the board I think inflation is coming down with oil prices and it says here uh euro zone infla- inflation slows more than expected as oil retreats. And so it says here Euro area inflation eased more than anticipated as efforts towards peace in the Middle East sent global oil prices lower. Consumer prices rose 2.8% from a year ago in June down from 3.2% the previous month and core inflation also dipped more than expected. Money markets see a greater than 50% chance that the European Central Bank will raise rates interest rates by a quarter point by September. All right, so that was pretty much immediately after the the inflation data. But then we had this as well, which it says here ECB views splinter on next rate move as inflation sinks with oil. It says here divisions have surfaced among European Central Bank officials over whether borrowing costs must rise further to get inflation back to 2%. It says here some policy makers are warning that inflation forces unleashed at the start of the Iran war are now unfolding while others are pleasantly surprised by tumbling oil prices and aren't convinced there'll be major second order effects. Major tension at the next policy monetary policy decision in July appears unlikely, but disagreements over further steps may come to a head at the following meeting in September when more data will have arrived. So it does still look like um you know, the the ECB are going ahead, but they're starting to cracks are starting to show as to whether you know, hikes aggressive hikes are justified. So I think overall the when we look at the the Euro index and I've been saying this said this last week we probably you know, see prices move to the upside and price is kind of caught in this range this auction of prices between this low and this high. I do think you can kind of buy low and sell high with the euro. Um I think it's it might be a little bit directionless, especially as we approach the summer months. Um and so I think the euro is maybe a buy low, sell high. So, if it does you can look for probably buys now, but if it does pull back a little bit more, I think that'd be a decent buy. If it does move to the upside around these highs here, then I think you can probably look for sells, but again this is probably more driven and uh by by the data, but if the data really kind of just is a bit mid in terms of um you know, it doesn't necessarily support aggressive hikes or aggressive cuts, then the euro is likely to remain kind of in this in this auction, this high and this low, this supply or demand zone. Uh looking at the yen and it says here yen slide puts market on outlook for Japan uh sorry, Japan's next red line. So, traders are looking for Japan's next line in the sand for the currency after the yen slid to its weakest against the dollar in four decades. Strategists point to 163 and beyond as the next levels to watch arguing the uh finance ministry may tolerate a weaker currency than during its intervention intervention campaign in 2024. And the yen's decline has come despite verbal warnings from Japanese officials with the currency weakening to as low as 162.50s uh in choppy New York trading. So, uh we're saying this really last week. That I think that the yen um is likely on the on the sell side. Um uh but again, a really difficult one. Um but and it was really kind of driven by the fact that as well. Um and we spoke about this, it was uh Japan's uh retail FX traders bet their government can prop up the yen. And um I thought the yen might be a little bit of a buy until I saw this. And it says here that Japan's retail currency traders have stopped betting on the yen to decline with the main with the mean estimate for individual investors yen positions flipping to a net long bet, all right? And so once you see retail traders going long on a currency, you don't necessarily want to you know trade along with with retail, right? And um they were really kind of at odds with it says here professional investors including leverage funds and asset managers are positioning for further yen weakness, right? So you got retail traders going long, you got asset managers and leverage funds you know still shorting. So ultimately the yen for me was still on the on the short side. So yeah, this week we did have you know prices kind of pull move to the downside for the yen pulling back a little bit. But I think any moves should be likely shorting opportunities. The only problem is though is that shorting you can't really necessarily short for too long because there's that risk of intervention, right? So if you look at the dollar yen and we'll get to it in a bit. It did touch or come close to the 163s. So the higher we go above that 163 is really the more risk of an intervention there is. So just understand that you know that the yen could weaken to the upside still this coming week but the higher we go is the more we could get a bit of an intervention so we could get a candle like this what happened on the 30th of April, a large maybe four 500 pip candle day. So just be mindful that even if you are short on the on the yen, maybe you don't necessarily want to get too short or you want to maybe start to take profits around that 163s 164 area. And then we have the pound and the pound um, has defied pretty much a lot of odds. Um, short squeezing, we spoke about this uh in the last uh week or two, where although the pound is, I don't think the pound is a buy, I think, um, the narrative is kind of changed. Two things that are kind of supporting, um, a few things that are supporting the uh the pound is that there's been a been a bit of a narrative change with regards to Andy Burnham. Um, he was seen before his election, before he got elected to be an MP as, um, maybe a bit problematic for the pound, but he's kind of changed his tune so far on the uh on his uh fiscal policies and, um, yeah, and then we also have uh high yields, right? High interest rates for the uh the pound, which is also supporting uh the uh the pound, but uh fundamentally I do think that the pound i- i- is is I don't think it's justified it being really at these levels or at least breaking out above these levels, right? Um, I think there's still uh a lot more uncertainty uh to go. And it says here as well that the, um, again, it says Andy Burnham's call on Ed Miliband could shape his premiership. So, Andy Burnham uh is considering Ed Miliband for the role of Chancellor of the Exchequer Exchequer, sorry, if he becomes UK Prime Minister, a decision that could define his time in office. Miliband's potential appointment has provoked jitters among investors concerned he would steer the government left and raise borrowing. And many Labour MPs fear the consequences of giving him a second a sec Sorry, giving him the second most powerful job in government. Burnham's team has declined to comment on the matter, saying he is focusing on policy and direction before cabinet appointments. While investors are gaining confidence in Burnham's promises of discipline on borrowing and spending. And I think the from a fiscal perspective, Andy Burnham is saying all the right things from a fiscal perspective, which is obviously calming the market in the short term. But, we have to remember that he has to Andy Burnham has to do something different from what Keir Starmer has done, right? From a fiscal perspective, because obviously from a the perspective of a borrowing and lending, that has to change, right? Now, it depends on whether that borrowing and lending plan when he releases his budget come September is is that the market kind of likes that. But, also as well, just from a valuation perspective, it says here Goldman Sachs says UK sterling now the most overvalued G10 currency. It says here the pound is set to face growing pressures as its recovery has made it the most overvalued currency among major peers, according to Goldman Sachs. Sterling has overshot its fundamentals with Brexit likely having weighed on the currency's fair value, and the currency is set to face a tougher environment in the months ahead. And Goldman's valuation metrics point to some degree of overvaluation, which constitutes a meaningful medium-term headwind for the currency. So, there's always a reversion to the mean. Of course, we've had this you know this this run-up. We've had a bit of a short squeeze going on as well. Where the market has been quite heavily short on the on the pound based on of course all the fiscal uncertainty and elections. And I think the short squeeze may be coming to an end, and there's always a reversion to the mean. And I think this is likely to happen. Who knows whether it's going to happen this week or this month, but ultimately the question I always think about when I'm looking at this is what's what's going to cause the market to kind of break out, right? Going to cause it to revalue this higher. If it's already overvalued, why would the market say that, you know, the pound should break out above this expensive area, right? It was expensive here in April 2012 2025, May, June 2025, even August, October, and and in January this year, right? So, we are at these yearly highs. Fundamentally and sentiment-wise, it would have to have a new catalyst in terms of so to to kind of revalue it higher, and I can't really see that or anything on the horizon right now. Of course, that could happen, but the chances of it happening, I think, are quite slim. If it does move above it, I think it would likely be a stop hunt if there's no new catalyst providing support for why the pound should move break out above there. And so, I think it would just be more of a bit more of a short squeeze before reverting back to the mean. So, my bias is still to the short side on the pound. So, just as a recap, for me, the dollar still remains on the buy side. Buy on the dips. The euro should be a could be a buy and a sell, so buy at lows and a sell at highs, depending on which currency you're buying and selling it against. The yen, I think, is still probably more on the sell side, although very cautious and short-term sells based on the potential for, you know, intervention to happen around the 163s, 164s, 165 area. And the pound, I'm going to stick to my bearish call on the pound. I don't see the point in trying to buy the pound. And plus, if I'm looking to buy the pound, I'd have to buy it low. So, I'd have to buy it really within that demand zone if I was looking to buy it. So, I think there's likely to be a pullback at some point. Hopefully, that pullback, if it is a pullback, is enough to if I'm shorting or when I am shorting the pound, is enough to obviously, you know, get a winning trade or two. So, that's really where I am with the currency. So, looking at the pairs now, we saw this week the the dollar euro dollar kind of pull back a bit so the last, you know, week or two. It's pulled back a little bit and again this was really kind of driven by the the the jobs data with the pound sorry with the with the dollar on Thursday. But also as well, I have to know I think I think the euro has had some supporting news, but it's not necessarily supportive enough to want to buy the euro against the dollar. So, I do think there's an opportunity to look for sales in this area. If not, you're looking for a sell probably on a larger pullback. But let's see what happens this week with the with the data with the inflation data for the for the dollar, but my bias is still to the downside fundamentally. So, let's see what happens there. The yen, again we were talking about this earlier and I did say last week that prices were likely to go higher and take out a lot of stops that probably resting here from a lot of retail traders because retail traders would have been looking at these highs. Remember they switched to being long on the on the yen and so retail traders are not likely to really have, you know, maybe 89 to 90 pip stops. And so it's probably taken them all out come back inside, but I do think that the there should be a buying opportunity if prices do pull back to these zones here. If it comes down to back to the 160s, 159s, then I think anything around here should be actually a decent buying opportunity. There was an area of um of support and resistance within that zone there. So, you probably look at this level as well. If you get good risk reward, then it's okay, I think. But if it pulls back a little bit more, I think in this zone here, I would look for a buying opportunity. Um the pound dollar pulling back on uh some uh some short squeezing, but I do think that the uh path of least resistance should still continue to be to the downside as long as the uh data does support at least um a uh a rate hike at some point this year for the dollar. I think a move back up into this area, the 134 [snorts] round number, should be uh a nice uh selling opportunity. Euro pound, so I ended up losing two positions, winning one, losing two positions on this one, which I'll get into a little later. Uh but this was really kind of driven by on the uh on the Wednesday, I think it was the inflation data that came out. Um but uh at the moment, I think this pair is a little bit on the trickier side uh to trade, but um I think the euro may still have a little bit of an edge uh because they are looking to still hike, whereas the pound um not too sure about that. So, this could be seen as a bit of a discount from a level perspective, I think, and a setup perspective, we'd have to wait for maybe a little bit more of a pullback if we get one into this zone before looking at a uh a a buy if you're looking to buy that. Or if prices move up, you know, beyond that level and then a a bit of a pullback so it establishes a bit of a demand zone in this zone before looking at going long uh on a on a retest. Then the euro yen, uh again, I think the euro probably does have bit of an edge at the moment over the uh over the yen. So, a pullback into this zone would be decent if you haven't got any already. I think a move especially move back down into, you know, a deeper zone, one the 183s, 182s. Um but again, just be mindful of the uh of the yen cuz any kind of yen uh move on the dollar back up to 163 164's and we could see a bit of a move like this candle here where it starts to you know, the yen starts to strengthen across the board. So, I think overall fundamentally probably looking for more buys than sells, but with a with a cautious definitely more caution. And pound yen pretty much similar to all yen pairs. Probably you would be looking for I mean I wouldn't necessarily even look to kind of trade this this pair. I think there's reasons definitely to buy the pound against the yen simply based on the carry trade and yield differentials, but personally I'm staying out of this this pair, but if you are looking for a trade purely based off technicals, if you're looking to buy the yen, then now is pretty much the time. If you're looking to buy the pound then you'd wait for prices really to kind of pull back, you know, maybe to this level here or looking for a nice fresh area of demand around here. Looking at the metals and the metals pulling back on some dollar on a dollar pull back of course. And again, when you're trading the metals, it's good to see there's a bit of confluence to dollar. If the dollar is cheap right on the on its index, then you want to see gold and silver on the expensive side. So, if you're looking to buy the dollar, then you want to see an expensive expensive gold and silver. So, if you're looking to buy the dollar this week, right? Then this is going to be a decent zone. Remember that the more supportive data is for at least rate holds for the US dollar, gold doesn't necessarily do well in a higher interest rate environment simply because gold doesn't pay a yield, right? So, you know, investors are going to put their money into a higher yielding asset like uh S&P and like um uh bonds that can return like a 4, 5, 6% um return, whereas gold doesn't. Therefore, gold is likely to remain under pressure in an environment uh such as what we're in. Um and then same thing with silver, if you're looking for a silver trade, I think you're looking at more downside. And again, the caveat is that, of course, the data um for the US uh the economy is doing okay. Um inflation is um is supportive, and the Federal Reserve are looking to maintain a higher interest rate environment. So, as long as that continues, we should see some uh some sells. And the S&P uh typically in a in a in a high interest rate environment, um we are likely to see we could see uh the the price being capped as well, right? But, um >> [sighs] >> uh it's a it's a bit of a difficult one. It depends on how much um how enticing uh and how high interest rates and bond yields are, um which will get money flowing from uh the S&P at off out of the S&P and into those bonds, right? But, um as a rule of thumb, normally in a high interest rate environment, um the S&P um isn't doesn't necessarily tend to make uh you know, continue to grow um you know, make outstanding highs, right? But, uh the market has been acting a little bit on the uh irrational side. So, I would say you can look for buys at lows, sells at highs. Um but, the the the more uh you get a um uh an environment where maybe the Fed are looking to potentially hold or even cut rates, right? If the data comes out and it's supporting the potential for more holds or more cuts, then I think you could see the S&P continue to grind a little higher. So, any pullbacks into a demand zone could be nice if we get sentiment that shows that the Fed are likely to maybe hike a little bit more, then I think we could see uh the 176 uh falls, 176 round number as a bit of a cap in the short term, right? Cuz we've been trending for quite a long time. Markets then usually find um um an auction uh an established range, and then we may grind higher or lower, but let's see what happens. So, buy at lows, really sell at highs. If I'm looking to buy the uh S&P, I'm looking really for the 17250s as really being the uh the area I would look to buy in terms of discounts. That would represent uh about a 4-5% discount, which I think traders will definitely look for around that zone. Well, they did around here, so will they do the same thing around here? As long as again, um there's risk on, then of course, I think that's going to be a nice area to look for buys. So, looking at a trade update, and um I was saying last week on the Aussie yen that I would take profit. Uh got um a pretty much a 4:1 on one of my positions. So, I took uh profit um on the Monday um on um on the on the Aussie yen. So, I'm now I'm out of this trade. On the pound yen, I did the same thing. So, exited uh on the Monday on the Sunday open Monday as I did think that the yen might be on the weaker side, and that's pretty much, you know, you can see what happened there. The uh the CAD Swiss uh ended up, of course, um winning one position, and I had an outstanding position on which I trailed my stop up to, and um it was my stop was was above the uh the entry. Therefore, um this ended up being a small win on the second position. Um so, the overall trade was a one a nice one to one win, and then a small win on the trailing stop before I was stopped out on the Thursday trailing. But I do think as a tip I do think actually the CAD could be a buy against the Swiss franc if it comes a little lower. So I'm looking for actually a little bit of a stop hunt below this area or any price that kind of moves down into this fresh area of demand. And I think we could see the CAD start to move to the upside as long as you know the risk on environment remains. So that's what I'm I'm looking for and the euro pound. So the euro pound I was saying last week I was a pip away from winning a second position on this. Didn't quite happen and then on the Wednesday we got this move to the downside. So I ended up winning one position on here, losing two positions. So didn't get a chance to trail my stop up. And so yeah, I do think that this could be the potential for another buy somewhere around here but I have to wait for now a setup on the euro pound. So new trades I took this week wasn't great on the on the pound New Zealand. So ended up taking two trades. So first of all there was a an area here that I thought was decent for a sell. Fundamentally again I'm I'm more bearish on the pound and more bullish on the on the New Zealand dollar. And so we've got I zoomed down into the lower time frames. Right, the first trade. One sec. Yeah, so the first trade was here. So ended up getting in on the Monday morning. And as soon as I got in on the Monday morning there was several actually trades I was looking to buy the New Zealand dollar. Um Um and Uh, there was the I was I was looking at the Euro and the CAD and uh both of those trades ended up being profitable trades, but I chose the pound and um and they ended up being a loser, right? So, prices ended up coming up here, ended up losing uh all five positions, right? On here. So, as prices spiked through, prices went to the upside, got triggered into 1 2 well, 1 2 3 4 5 on the Monday and it went to the upside and literally stopped me out. So, I lost five positions on that one, but then I managed to get in again um right here. Right around here and again, set up five positions, but I didn't manage to get triggered into any before taking uh the majority of the profits. So, as I entered again on the uh Tuesday, it hit uh a nice uh one-to-one trade, but I've only got in I only managed to get in on one position cuz prices didn't pull back. So, I took uh 80% off around here. So, um I'm in only about 20% of that one position. It nearly got stopped out right here. Not quite and we and and I'm still um I'm still in this trade. So, uh one um well, lost five positions, one um uh basically point eight of a position and still in this and um and they're looking to kind of just trail the or looking to uh trail the stop down, but also as well see how far this one position can go. If prices, you know, stop me out again, then I will look for another trade in and around the uh these highs to try and look for some short trades. Um and then actually I made up for the uh for the pound New Zealand losses with the New Zealand Swiss. So, again, managed to get involved in this trade on the Monday morning. So, again, basically the same same things. And my entry was here. Set up five positions when prices pulled back, triggered me into, you know, two positions, three positions, four positions, and then I got a fifth one as prices spiked down here on the Monday. And then managed to actually take one to one on all of these, apart from, of course, my main my top position. So, managed to get a one to one on this position here. All right, on that one there. Managed to get a one to one on this one here. All right, as price has started to move to the upside on here. As price has moved to the upside here as well. As price has moved to the upside. All right, so that made up four four wins, four positions. And now I've got an open position, small position, well, one of the positions here, and I'm looking to now trade this to the upside. Hopefully, we can get a bit of a move on the New Zealand Swiss, and that can go for a bit of a runner on the on the daily. So, although I lost five on the pound New Zealand, 1.8 on New Zealand, and made up for the losses. So, you can pretty much say a little bit of a break even week this this week on on on the trades, but I'm in one open position on this. So, let's see if this makes up for the losses. So, that's it for this week. I hope you find the analysis useful. Please don't forget to like, subscribe, and share the content on your social media platforms if you find the content helpful. So, take care, all the best, and have a great trading week.