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

Hi, I'm Leon Ro, currency trader and trading coach at trading180.com and welcome to this week's supply and demand forex, gold and S&P fundamental technical analysis for the week ahead starting the 13th of September. Hope you're all doing well, had a great trading week. And uh getting into the week ahead and this is from tradingeconomics.com. And they say the potential for constructive dialogue regarding tanker flows between GCC and Iran next week halted the surge in oil and gas prices at a time that financial markets threat over the inflationary outlook. outcomes will impact global borrowing costs as the Federal Reserve sets interest rates for economic data. The US will release retail sales, trade terms, and industrial production. Monetary policy announcements are also taking the spotlight in the UK and Japan. A busy week of data in the UK features its inflation, wages, and retail sales, while Germany publish its ZEW confidence indicator. and the euro area will post its goods trade and industrial production. A series of key data for China include industrial production, retail sales, unemployment, housing prices and credit aggregates. So there's uh a lot going on this week, a lot of market moving news and uh so looking at really overall risk sentiment and what's happening in the market and looking at starting off with the the VIX, the volatility index. We got a bit of volatility this week. Uh this was really mainly due to I think the um uh oil uh inflation uh going higher, a bit of an escalation in the uh Middle East war. Um and risk sentiment overall though is still more in the optimistic side I think because uh think of 20 on the VIX as a bit of a line in the sand between uh risk on and risk off. and all risk on and risk off really for those of you who are new. Risk off is when investors are focused on safe haven plays protection of assets. So they're going typically going to safe haven uh what they consider safe haven assets and risk on is really where investors are focused on the yield return. So they want to take put a bit more risk on the table. Um the S&P would be considered a risk on asset for example. And um and so really the VIX and the S&P kind of move in opposite directions. So when you typically have um you know the VIX move uh above the 20, what you really would normally have is the S&P moving to the downside which is a which is an indication that we're heading into a bit more riskoff environment because a riskoff environment the S&P doesn't necessarily do too well. Anyways, um so I think even though we're at what 16 1580s um uh yeah we're not really um in in any any kind of risk on environment although we we are seeing uh oil move to the upside price price of oil uh moving well above the $100 a barrel. reached a high of $111 a barrel, settled around $106. Um, and this is really uh looking at um inflation, right? So, a measure of inflation, energy prices uh really being affected uh globally um and uh the US Treasury yields uh moving really uh a lot higher and this is a reflection of uh short-term interest rates and what the bond market thinks about interest rates. And so when you see treasury yields move to the upside really the market is likely pricing in uh rate hikes and uh gold at the moment really um just moving sideways a little bit of no man's land at the moment no direction and this is I think due to uh partly because you've got uh a stronger dollar but also at the same time you've got um maybe some potential fears um of um you know some sort of economic slowdown uh because of uh inflation [snorts] rising inflation, right? So, um let's see what happens with gold. But for now, it does look like I think we're in a more of a risk neutral, sorry, risk neutral, more risk, uh more risk on environment. But if we do start to head higher on the uh VIX towards that, you know, 20, start to break, you know, above the 18 uh VIX high towards the 1920, then you're likely to see the S&P obviously move to the downside. And if you see oil maintain it's above us it's $100 a barrel um and the uh yields you can pretty much expect uh rate hikes and more of a defensive play in the dollar in that environment is normally um the uh the play right in terms of you're looking to buy the dollar but looking around the the markets at the moment Bloomberg weekend it does say um uh that Christine Lagard says current inflation shock will be longerlasting and we'll get into that a little later um But generally [clears throat] um it Bloomberg aren't necessarily focused on the Middle East whereas the front pages of Reuters their main um stories are about you know new report of attack on straight horm shipping fans fears of threats to oil supplies. So, it's always in the background. Um, and it is um a concern still even though at the moment uh the market isn't necessarily reacting uh to it um uh uh for now anyway, but we'll see in the uh in the coming weeks. So looking at the US dollar and the US dollar and this is the dollar uh index equally weighted against the euro, the pound, the uh the yen, the CAD, the Australian dollar, the New Zealand dollar and the Swiss Frank. And I was saying last week that um I would likely try to be a buyer of the dollar. Um I didn't really get an opportunity to get involved in the dollar. I wanted to get involved in the dollar CAD, but the setup wasn't quite there uh for me. Uh but there was an opportunity to buy the dollar um last week and I think we should continue moving higher especially after what we saw on Friday with [snorts] core CPI topping forecast bolstering case for rate hikes and the consumer prices index excluding food and energy climbed 0.3% in August from a month earlier according to the Bureau of Labor Statistics data futures showed investors priced in a rate hike next week as a near certainty following the release and put a high likelihood on a second increase before the end of the year. Report suggests inflation made little progress towards the Fed's goal last month and made ongoing pressures from the Iran war tariffs and the data center buildout. And the Fed's goal really is for inflation to come down to their 2% target. Uh and inflation is rising, right? So that's why it's saying that it's made little progress towards the uh the Fed's goal. And looking at uh the CME Fed Watch tool in terms of uh interest rate probabilities and you can see uh from Friday we've now got an 87.3% chance of a interest rate uh hike and so that needs to be priced into the dollar as well as uh if you go to the SOFR uh watch on the uh tool section on the left hand side if you click that you can also see and I'll just zoom in a little bit. Right. You've got um here the Fed decisions right here and then it says now that it's pretty much um a high probability of a of a rate hike on the 6th of September. But also if you look at December uh the probabilities are quite high and then there's hikes as well in March and June being priced in. So I think overall really uh the dollar should really be uh more on the buy side and even in a risk offer environment um the dollar should remain I think on the buy side. So, uh, looking at at where we are overall, um, you can either look to buy the dollar now or if you're looking um, you know, on on a lower time frames um, then any pullbacks [clears throat] would be uh, buying uh, opportunities. But I think the dollar um, if you are looking at this purely from a price action perspective, I think this is a decent uh, buy uh, for the dollar. That would be my direction. The euro uh similarly I think is also a buy. So uh the euro at the moment uh they uh from a fundamental perspective it says here German yields um hit 17-year high as traders uh up ACB hike bets. So, a sell-off in European bonds extends after European Central Bank President Christina Guard flagged in risk to inflation, adding to investors ongoing concerns about elevated energy prices. Uh, traders boosted wages on further ECB interest rate hikes after Lagard flagged risk to inflation in the Euro area, saying the conflict in the Middle East and developments in Russia in Russia's war against Ukraine pushed the path of energy prices up further. The ECB said inflation is set to remain well above its 2% target for an extended period as conflict in the Middle East continues to fan price pressures and that's really what you know this Bloomberg article you know the headline was saying ECB Lagard says current inflation shock will be you know longer uh lasting um and so yeah uh the the ECB and I think really central banks likely around the world are likely to um to to hike rates and not all rate hikes actually are appreciative or appreciate a currency. Um there is a stagflation element where you have uh rising inflation but if the economy u an economic growth can't support um hike uh rising um interest rates and hiking interest rates then we have a stagflation scenario which actually is uh depreciative for a currency. So what you're looking for if you're trying to find nuance in um you know if all central banks are looking to hike rates one is who's looking to hike more aggressively than the others that's the one that you want to buy but also as well which central bank is being forced to hike rates um based on purely on inflation uh but will have issues with their if they do um with their economy right because uh interest rate hikes um can um uh contract have the effect of contracting um the economy right if the economy is not already growing. So um stagflation fears will be uh you know the the nuance and that would really kind of um you can determine whether you want to be a buyer or seller based on whether um there's going to be stagflation fears uh or not. And as I said before really uh the energy the [clears throat] energy markets it says here signal winter crisis and rising interest rates and that's so that's really across the board right the uh you know gas um oil and uh a lot of uh say a lot but there are some economies that are more susceptible to rising inflation than others right Europe being one because they import a lot of their energy um as well as the UK and Japan uh are really susceptible to inflation uh rises in inflation. And if anyone is driving around in the UK at the moment, I filled up my car the other day and uh it was likeund uh so um 1.70 um uh uh p a liter, right? So yeah, prices are going uh higher and are likely to to go a bit higher. So um it's not just uh um local locally or or inflation is just affecting one country. It's going to be affecting every uh country uh at the moment right in at least the the western world. So um I think that the euro also is a buy. Uh I think um the their economy is doing surprisingly better than expected. So I do think it may struggle a little bit to the upside. Um, and this is really kind of maybe based on maybe more dollar strength, but also as well there may be uh there's I know there's some domestic issues in terms of uh elections. I know there was a far right party I think it was in Germany that managed to uh get elected or seen as being elected. Um so they got a majority and so that could weigh also on the euro. So I think at the moment it's um it's a tie between the two. So, you'd have to find really reasons to want to if you're looking to sell the euro against the uh the dollar, you'd have to find, you know, some some nuance, some macro um and maybe some uh some uh maybe some fiscal reasons why. But, uh overall, I do think that the euro is also a buy. Uh moving on to the pound. Now, the pound also had some decent news, right? Um it says here that AI helps with the UK economy. unexpectedly grow in boost for Burnham. So uh Britain had a strong growth in July with domestic with gross domestic product rising 0.4% and output out sorry outperforming expectations. The growth was driven by services activity which grew 0.4% with computing programming and AI products being the largest contributors. The uh strong growth is a boost to the new prime minister, but pressure on households is growing due to rising energy bills and borrowing costs. So I think in the short term, I understand why you would want to be a buyer of the of the pound, but um um you may or may not know, but the UK is going is releasing I guess their their budget. The government are releasing a budget, a fiscal budget. So, it says here that the UK pays the most since 1998 to borrow after guilt selloff. And it says here, the UK paid its highest borrowing costs on a debt sale since at least 1998, selling4.25 billion pounds uh of um of of um uh it says here of January 2056, bonds at 5.82%. concerns about inflation surge triggered by the Iran war, growing government deficits and the impact of large scale uh sorry large sales of corporate debt by companies involved in the artificial intelligence boom were behind the move. Higher borrowing costs are pressuring UK Chancellor John Healey ahead of next month's budget with Bloomberg Economics estimating that the government's financial wiggle room under its fiscal rules has been harved since the spring. So essentially uh the long-end bond yields right um the the 30-year um are basically rising. Now why is that important? because um it affects government borrowing, fiscal borrowing and it's a sign the long-end bonds are a sign um of um uh I guess the bond market uh bond market's confidence in uh the government's um you know long-term plans. So the government are borrowing you know at 5.82% 82% and if it starts to rise the debt that they have to pay back of course goes higher which means that actually that affects the budget right because it says here um that the government's fiscal wiggle room under its fiscal uh financial wiggle room under its fiscal rules has been harved right so actually what they want is for borrowing cost to come down so that they have a bit more money in their pocket and then they can um enact um some of the policies that they you know promised to when it was in their manifesto Andy Burnham um you know to deliver right to the public but it's going to be harder. So what does that actually mean? Um it means that um you know taxes are likely to be hiked and uh maybe certain promises that they made to uh improve the economy may not be able to be done right or completed or fulfilled because of the fact that you know the the the budget that they thought they had to improve the economy they just haven't got it right because they're paying um you know that budget needs to be paid back and the interest being paid on it is taking up the uh the budget budget um uh fiscal uh wiggle room, right? And I say wiggle room, but you know, they're uh uh you know, in terms of their their accounting, their profit and loss. So um so basically the UK are in a sticky situation, a very very sticky situation um as we get into the um the October budget. So, I think that when we look at the the pound, although we could see a move to the upside, I do think and based on short-term um you know uh GDP data, right? I think the key really is going to be whether the uh central bank of course bank of England are likely to uh hike rates, right? And again they don't necessarily want to high crates because um if we are in a environment where the economy isn't necessarily doing great although at the moment it is of course because I say great but it's doing okay. It was doing okay. So it kind of gives the Bank of England the little bit of headroom. But if they hike rates and then you have a situation where you have um a terrible fiscal uh budget, it's going to kind of mess things up because you've got high interest rates. um high borrowing costs uh you know uh the consumer has to you know if you own a mortgage for example you're going to have to pay higher mortgage fees etc right and interest so um I think if anything I think the pound may be susceptible to stagflation and so I my bias really in over the medium term is to look for short trades so you know if you missed out on buying here it's not necessarily too late but any pullbacks I think should be a more shorting opportunities on the pound. And uh if you are waiting to join Trading 180, um enrollment opens September the 20th um 20 Yeah, sorry. September the uh yeah, 20th, 2026, which is next week. And so um I know a lot of people who have been asking have been messaging me on on the uh on the side. And so yeah, enrollment opens on the September the 20th. uh you'll get access to uh lots of things including the discord group where you have uh you know just a a wealth of information um strategies and uh fundamental analysis. You'll get access to uh the trading videos which are released uh twice a week. Once on a Wednesday or Thursday I have a live group call where you can ask questions. They are all recorded and posted in the uh trading uh videos channel. And uh you can see here we've got you know tons and tons an archive of uh videos that you can look to go through years of videos probably about about seven eight years of videos in there uh which you can go through also as well you'll get access to the fundamental analysis spreadsheet as well as my bias on uh on the direction of uh of pairs and also as well a uh new uh macro intelligence uh newsletter which I release uh twice a week uh once midweek and then once on a weekend which really goes over um the uh fundamentals in in depth. We cover um you know the the macro scorecard. We cover um uh rates yield coot and the VIX. So, as a little bit of a sneak peek, you can kind of go through, we can see the analysis here, right? And uh go through it. And it all really matters when it comes to making a decision on whether you want to be a buyer or a seller of a currency or currency pairs, right? So, uh again, we open on the 20th of September, and it will only be open for about 5 days. It might be the last time this year that you may I may open. I may open maybe one time maybe to towards Christmas, but it really just depends on uh the time that I have. So, uh if you're interested, enrollment starts on the 20th and you can uh you can sign up and join then. Uh moving on now to the Japanese yen. And the Japanese yen um I think still remains on the buy side. uh the Japanese yen uh continues really um uh and it says here that the bank of Japan watches see follow-up hike by January after September move. So the it says here the bank of Japan will raise this benchmark interest rate next week with a follow-up uh increase by January according to economists surveyed by Bloomberg. All 52 Bank of Japan watches forecast borrowing costs will be raised at the end of a two-day meeting on September the 18th with 93% expecting another move by January. Economists see a faster pace of policy normalization with about 46% seeing the pace of Bank of Japan rate increasing picking up to roughly once every quarter. So um everyone at the moment or most economists see the bank of Japan as being hawkish. Um Wall Street um say and strategists are split though on the outlook for the yen's rally because we actually have rallied uh quite a bit right. Look at this rally. When you look at um you know uh the rally um you know compared to other rallies you can see we've really kind of moved uh quite a bit. And it says here, Wall Street strategists are divided over whether the yen's latest rally can last even as the Bank of Japan leans leans towards raising its benchmark rate. Some strategists say a stronger yen could reduce the Bank of Japan's incentive to raise rates while others see um another catalyst for the currency if the Bank of Japan tightens as expected. The yen's direction hinges on what the Bank of Japan and the Federal Reserve do next. That's really the is most important part with some strategists saying the yen will continue to be supported if the Bank of Japan policy makers confirm further tightening remains on the table. So um we could see a reversal, right? We could see a reversal and the reversal really would be based on whether the Bank of Japan um do a doubbish hike. And what a doubbish hike really is is where the central bank hike rates but their forward guidance and what you know what they're going to do next their statement after they hike is doubbish right and then you know cuz the market really is is trying to expect or wants to expect a more hawkishness. So they want the um the bank of Japan to signal that you know more hikes are on the table and that they're um they're looking to hike a bit more. Right. But if we get a hike, but the statement is dovish, we could see actually a really big sell-off. Now, if you know, you see price um come down, but it's a hawkish uh hike, right? And price but price is still drop, then actually that's what we want to see, right? Or what I want to see because then it gives me a chance to look to get involved in um a uh a trade, right? We're looking for a pullback on the uh on the yen index and then looking at any yen pairs to be a buy um on those yen pairs right against the weaker currency. So um that's what I'm looking for. But if the end of the week comes 18th of September and we see um a hawkish I mean a dovish hike then of course we're likely to actually sell off quite drastically I think. So, just keep your your eyes um [clears throat] uh out on that one. So, uh just to kind of wrap up on the uh on the pairs for me, I think the dollar is on the buy side. The euro is also on the buy side. The pound could be a short-term buy, but I think I'm more looking leaning towards a sell. And I think the yen has had its run, although it should be more on the bullish side. um the you know buying the yen will or selling the yen will be determined on what happens uh on the Friday when we get the announcement regarding um what they're going to do after they after the expected hike. So looking at the pairs and so uh euro dollar when you've got two you know basically currencies that you're looking to buy uh typically what should happen is you should have a bit of a ranging a sideways moving market what I term as an auction. Um so it's bit it's a bit directionless and harder to read. So I'm not really interested in this pair at the moment. I think um there are better pairs out there are clearer directions. But if you are looking to buy, then you're looking at probably now if you're looking to sell, I would say sell likely in this uh supply zone right here. Um the dollar yen, again, not really a pair I'm interested in um until probably uh Friday until we find out whether the Bank of Japan is more on the uh dobish side or whether they're going to continue to be hawkish. If they are doubbish then this actually looks like a really really nice buy because I think the prices are likely to move up. They're going to be a lot of short squeezing going on I think and uh that would really be the play because we already know that the uh the um well we would have got the information with regards to Fed hikes and whether they're looking to hike a bit more and um I think the uh the yen would be the catalyst for any moves to the upside. uh the pound dollar I do think overall this should likely continue to be a sell in the short term we could see moves you know move a bit higher up to the 13640s the 13680s I think is going to be a really uh nice area to look for a short as we head into of course you know the October budget and uncertainty around that I think any drifts up towards these levels I think should be decent for a sell euro pound. Again, I think the euro uh should still likely have the edge. Um um but again, this pair is probably getting a little bit more harder to uh to kind of uh predict or forecast um in in the short term. So, if you do want to be a buyer, any pullbacks I think down here should be decent for a buy. If you're looking for a sell, I guess you could kind of look for maybe a sell. This isn't necessarily the strongest supply zone in in the world. So, I would say you're probably likely looking at maybe a bit more of a pullback here unless we get, you know, a move to the downside, which, you know, uh proves that there's strong supply here. Then a pullback into that area before looking at going uh short would be really the play. Euroyen at the moment. Uh the yen of course being the stronger out of the two. Um, I think again the uh the direction would be determined really kind of based on what happens with the yen. This could be a decent buy, but there's no real setup at the moment. But if it does pull back this week and then you get a dovish um Bank of Japan, I think that's going to be a very nice um sell, sorry, a sell for the yen, but a buy for the euro. Um, but if you're looking at um a hawkish uh uh hike, then of course any pullbacks into a supply zone are going to be uh sells. And then we've got the pound yen. And again, we've got the bank, we got the Bank of England making their decision. I think actually the Bank of Bank of England are going to be uh on the hawkish side because they're not immune to inflation. So we could again get more a little bit more upside this week and then let's see what happens with the Bank of Japan. So uh so yeah, those are really the uh trade setups. Uh looking at gold and of course gold drifting more to the downside based on a bit of a stronger dollar and gold. It says here gold falls as traders raise Fed hike bets after the US report uh price report of course that's inflation report and so again gold moving in the opposite direction to the dollar you know most of the time um but also as well but what's kind of supporting gold over the medium term is that China's central bank adds most gold since 2023 even as prices jump. So um yeah it says here after spending much of the year under pressure bullion prices rose almost 10% in August and with a revival of the so-called debasement trade the US Treasury's plan to ramp up buybacks of government debt fueled concerns about inflation and dollar weakness prompting investors to seek alternative stores of value such as gold. So, um, gold, you know, the Chinese central bank, um, is buying, um, right now, and they've been buying, but ultimately it's, um, uh, I don't think it's a play for for the short term, you know, they just they just been buying. And so, I think for this to be really be a buy, there needs to be a trigger, I think, for any kind of dollar sells, which at the moment, it looks like the dollar is uh, is king at the moment, right out of the major currencies. the S&P uh moving to the downside. I was saying this last week that likely continued to move maybe to the downside based on rate hikes and a rate hiking environment, a high inflation environment, uh the S&P doesn't necessarily do so well. And so I do think that any pullbacks into a supply zone um should be more selling opportunities. Um, but overall I do think that the S&P is a is always is always a buy, but I think in an environment the S&P is going to struggle to make uh new highs, right? Um, the way that it kind of makes new highs is um, you know, where the dollar in an environment where you've got more risk on and you've got um, you know, the the the Federal Reserve are on the dovish side and they're not looking to hike rates, right? And so that's really where we are. So if you are looking for a buy, a decent discount would be actually a pull back all the way down into this zone. Um I think is a decent buy. But again, uh the buying direction really kind of comes from or the trigger will come from a dovish um perspective from the Federal Reserve. Now looking at uh trade updates, uh my trade update, we finally hit target last week. We were I think a few pips away last week. I was saying about yeah about maybe was it seven pips away from hitting uh profit target. I did um manage to trail my stop down but then on the Monday prices uh hit my uh profit target. So this was this final position cuz I end up getting in on four positions on this. This final position was a nice 6.62 to1 trade. Um and this was again purely based on the fact that uh we thought in the room that the yen was a buy and we've been uh buying the yen uh for the last few weeks now positioning ourselves uh to get long on the yen and uh selling the Canadian dollar right so when the CAD came out and they had their trade dispute that for us was a trigger uh to sell the CAD. So it took a little while to sell off but eventually it did. it pulled back to a really nice area where we wanted to be a seller and that was the trade. So that's the trade update. Uh the new trade that I've taken this week was on the uh New Zealand CAD and so at the moment I think the New Zealand may have a bit of an edge over the Canadian dollar. Um it's [snorts] pulled back quite a bit. I don't think the Canadian I don't think the uh the New Zealand dollar is um is as bad as the Canadian dollar uh domestically, but we'll see of course whether this trade works out. Um but this is really the uh the trade at the moment, this level here. I think the um the New Zealand dollar can uh can rally a bit against the uh the CAD. It wasn't necessarily my preferred trade. I really wanted to get in on the dollar CAD, but the uh the trade just didn't set up for my uh technicals. So, uh, unfortunately that wasn't, uh, a trade I could get involved in. But, uh, yeah, that's it. Let's see how this one does. If it pulls back, it will trigger me into, uh, some buy trades. Right, I got five, I got four, um, buy orders below there, so I can kind of buy, uh, for cheaper and then take some profit off as prices move to the upside. So, that's the plan. Let's see what happens this week and over the next coming weeks with the New Zealand dollar. Anyways, uh hope you um you all found the uh analysis useful. Don't forget that the enrollment opens September the 20th. I look forward to working with you if you decide to join. And uh I'll speak to you all in the next video. Take care.