Fundamental Trading with a Directional Bias

I haven't posted on here for a couple of weeks. Had a few things to take care of so it's not been top of my priorities list to be honest. But here goes.

Last week we saw a small rally in the Aussie Dollar as the RBA removed their easing bias from their rate statement. Although they did this, they still kept the same economic concerns there, meaning the fundamental stance hasn't completely changed, it's now just more neutral. Sterling had a decent week against most other currencies, although data was mixed. We saw a fantastic number in the NFP too which prompted some more buying in the U.S. Dollar as this had investors pondering on whether this could give the Fed reason to hike rates sooner.

Monday 8 June 2015

On Monday we have continued G7 meetings taking place. This could cause movements if anything based on Monetary Policy or the Greece situation comes up. We then have building permits from Canada which is expected to come in a lot worse than previously.

Tuesday 9 June 2015

Tuesday is a bit of a non-day. We have some Australian and Chinese news but that is all.

Wednesday 10 June 2015

Wednesday is definitely the highlight of the week this week. We first have Stevens speaking from the RBA. Watch out for anything hawkish coming from Stevens as the RBA removed their easing bias last week so the AUD will be prone to hawkish comments, which could give the AUD a further lift.

Manufacturing production is forecast to come in weaker than last month from the U.K. which could give Sterling a break from recent gains. Mark Carney is also speaking on Wednesday.

The most important event this week is definitely the RBNZ rate decision and accompanying rate statement. Last time the RBNZ met they mentioned the possibility of a rate cut which, as can be seen below, provided a huge NZD sell-off.





The market has priced in a rate cut heavily, although there are mixed views on what the RBNZ are going to do. Some believe that they'll cut in both June and July, while others believe they'll not cut at all this year. If we don't get a cut, it's likely that the NZD will rally because of the sheer volume of selling coming into this event.

If we get a cut, and the statement shows that their easing bias is still there, I'll be looking to get in short again on the NZD.

Thursday 11 June 2015

On Thursday we first have the employment change and unemployment rate. The employment change is forecast to be much better than the last reading, so this should provide some short term support to the AUD.

We then have retail sales data from the U.S. which is forecast to be much better than previously. As we know, the Fed is currently data dependent so this should provide us with some support for the U.S. Dollar.

Later on that day we also have Poloz speaking.

Friday 12 June 2015

On Friday we have PPI and Consumer Sentiment coming from the U.S. which are again both forecast to be positive. If we get strong data on Thursday, this should provide us with a great opportunity to get Long on U.S. Dollars again.

Summary

Overall, it's looking like it could be a strong week for the U.S. Dollar with obviously the RBNZ rate and statement the main event of the week.

In the next couple of days I'll be doing a run down on each central bank and their current stance in the market which should help for determining direction.

Hope everyone has a great week.

You know, sideways is also a direction.
When the fundamentals seem to say that a move has been spent, that is, if the reason for the fall or rise has been accounted for, then the market usually goes "trendless." That's when I mostly switch to a shorter time frame and trade support and resistance or shorter trend lines.
But I still read up on the fundamentals...
Enjoyed your posts!

Hello,

can anybody please recommend me any bank made global fundamental economical/market research reports, it can be even paid service. Im looking for something on one place, full reports (fundamental, economical, forex), just to read it and not search 10 different websites. Does any bank provide this services ? (30-100 usd/M)

To me, Fundamental is like weather forecast.
You just have to get prepare, bring the necessary tools according to the weather forecast.
Cheers and happy new year

Could you (or anyone) give more info on this? I was thinking of doing something similar but with analyst and giving them a grading based on how consistent they are

Fab Thread Jake.

Glad to see you're a fundamental guy like me and using the same broker as well

Do you use Ransquawk to help boost your fundamental picture?

Weather forecast is the same analogy/metaphor I use lol

Welcome back me...

So today we have some renewed pressure on the USD. The Fed just released their FOMC Statement for June, and dropped the word “patient” in regard to future rate adjustments, stating they will act as necessary to keep inflation where it needs to be. Inflation is below their target, so their “act” would be a rate cut. Dovish move.

So we have our weak currency, now to pair with a stronger one.

CAD - hawkish forward guidance
JPY - safe haven
CHF - safe haven
Gold - safe haven

I’m looking for any levels in any of the above crosses where it would be appropriate to sell the USD.

USDCAD



USDCHF



USDJPY



GOLD



As a final note, I’d be looking to sell the first 3 if price moved back to any levels that the current market price is currently below. For any levels below the current market price, I’d wait for price to break below and then re-test.

And the opposite for Gold as that would be a long position.

All active orders that I will take, until further notice...

Week Ahead - 4 May to 8 May 2020

COVID-19 is likely to continue its tight hold on headlines around the world for the foreseeable future, meaning risk appetite is weighing on markets more than usual.

This week we have the Bank of England's and Reserve Bank of Australia's rate decision, amongst other events such as New Zealand and U.S. employment figures. It's likely we'll see much of the same action we already have; rises from the apocalyptic March sell-off resulting in many currency pairs stuck in a range.

Short Opportunities in EURUSD

Last week the ECB surprised markets with a very half-hearted rate cut and no additional QE, leading participants frustrated and providing some much needed short term positive sentiment. The bank did however remain very clear that additional stimulus is available and there is no limit.
I believe the Euro is overvalued against the U.S. Dollar (currently gaining from safe-haven inflows) and last week's moves provide a fantastic selling opportunity back down to the 1.0760 area.

GBP Pairs Stuck in a Range

Across the board, GBP pairs are stuck in a tight range ready for their next move. I would favour the downside against strong / safer currencies such as JPY, CHF, and USD due to the accommodative policy in place from the Bank of England and their struggles in dealing with COVID-19.
A great example is GBPJPY, a move below the 132 area should push the pair much closer to their mid-March lows.

USDCAD Maintaining Strength

Stuck in a range like other Canadian Dollar pairs, USDCAD has held the 1.385 level very well last week. It is now making headway to the 1.4260 area. A break above that level would likely see it push at least up to, if not past, the mid-March highs.

Conclusion
Opportunities are currently limited to buying and selling at range extremes, until we get a break out of those ranges. Those breaks, however, will likely call come at once as a result of a further market catalyst.

Welcome back jack. I really appreciate your analysis.

Reserve Bank of Australia - 5 May 2020 - Pre-Meeting

In a few hours we have the RBA rate decision, likely to provide AUD volatility whilst not providing a clear path for the Australian Dollar.

At the previous meeting, the Reserve Bank of Australia re-affirmed their current monetary policy package as adequate and didn't suggest that they would be moving rates lower or increasing the extent of their first ever QE programme. Specifically, they removed references to "acting as necessary", a common term for central banks wanting to leave their policy options open.

As Australia brings COVID-19 under control like it's close ally New Zealand, it's likely the RBA will move further away from that strong dovish stance; I would not expect them to show their hand at this stage, however. AUD is not currently on my watchlist due to the accommodative policy without the strong dovish forward guidance, however some short-term strength would not surprise me heading into and out of tomorrow's decision.

A move against a weaker currency such as 1) British Pound and 2) Canadian Dollar may play out nicely.

GBPAUD

A move down towards the 1.9000 area seems a reasonable short play.

AUDCAD

Although not as rewarding as the GBPAUD play, AUDCAD is holding the red area so a move up to the 0.9150 zone is likely. With more-than-hawkish comments from the RBA we could even see a push above that 9150 zone.

Happy trading.

Reserve Bank of Australia - 5 May 2020 - Post-Meeting

The Reserve Bank of Australia opted to leave policy unchanged whilst confirming they can purchase more bonds, if required. With Australia dealing with COVID-19 better than many other G7 countries, I am neutral on the Australian Dollar.

AUDUSD

AUDUSD has been forming a series of higher highs and higher lows and is now hanging just below its crucial 0.6660 level.


AUDJPY

AUDJPY, like the USD cross, has also been forming a series of higher highs and higher lows and reacted at the key 70 level.


I would expect both these pairs to form a range around their current level, with any news, positive or negative, shifting the balance to the upside or downside, respectively.

Really good thread this.

There are no major central bank risk events in the coming week; the next up is the Reserve Bank of Australia on Tuesday 2 January 2020.

This week’s major risk events are:

1. Tuesday 26 May - BOC Governer Poloz speech - This event is likely to be much of the same as we have already heard from central banks in the past few weeks. Oil markets getting a mention would likely increase volatility further.
2. Wednesday 27 May - ECB President Lagarde speech - We are likely to see more negativity from the ECB due to continuing pressure on global economies and the lack of any real progress with a COVID-19 vaccination / treatment.
3. Thursday 28 May - USD Prelim GDP Q/Q - This is forecast to come in the same as previous so I wouldn’t expect this event to affect the USD heading into the announcement; USD is likely to remain supported due to safe-haven flows.
4. Friday 29 May - CAD GDP M/M - No forecast as of yet for this announcement. CAD remains weak but will find support from lifts in oil prices.

I continue to be heavily bearish on GBP and EUR, bearish but cautious on CAD, NZD and AUD (due to their sensitivity to current volatile commodity prices), and expecting buyers in USD, JPY and CHF due to safe-haven properties.

Good luck!

Great thread! Subscribed.

I am not as bearish on AUD as I have been recently. In the RBA's last rate statement on 5 May 2020 they came across as slightly more hawkish than their oceanic counterparts, and other G7 countries such as the UK and Eurozone.

Therefore, I am now firmly on the sidelines following price action in AUDJPY. We are now stuck in a critical area between 70 and 71.20; I have no bias on AUD right now.

I still hold fundamental biases in various currencies, such as short GBP and EUR however the sentiment is currently opposing these views.

GBPUSD
Price breaking through the key level marked on the below chart clearly indicates to me that we’re not ready for a strong move lower anytime soon. Couple this with a higher high and higher low that has formed over the past few days and price looks set to push even higher.

Today’s inside bar following yesterday’s much larger daily move screams even more indecision.

I still believe trading down towards the 1.21 area is fair, however the timing is currently way off.



GBPJPY
Pound Yen paints a very similar picture to that of Cable. The break about this key 132 area should create a push higher in the short term with my longer term target being the 129.50 area.



EURUSD
I strongly maintain my negative macro outlook on the Euro but like GBP pairs, price seems to be pushing away from moving down further in the short term.

This pair is at a much more crucial level, currently being sat at an area that has been tagged numerous times already. Following a series of higher lows, a move up through this key area towards the 1.10 area and above would not surprise me.



AUDJPY
Australia and New Zealand have dealt with the COVID-19 outbreak much better than many European countries and U.S.A. so recent strength in AUD and NZD comes as no surprise; it is likely that lockdowns will be eased faster and be of a greater magnitude. This should get domestic economies moving quicker. Couple this factor with a pickup in commodity prices again due to the easing of lockdowns and it provides further clarity on the current sentiment of these two currencies.

It is still worth noting that the monetary policy from these countries still favours the downside; when normalcy somewhat returns to domestic economies and risk sentiment has subdued, pressure is likely to again weigh on these currencies.

AUDJPY has formed a series of higher highs and higher lows, pushing through various resistance levels. A clear return to the downtrend would be needed before I begin to get involved in this pair.

This week is a very busy week for markets. Focusing on the major data points…

Tuesday 2 June 2020
The rate statement from the Reserve Bank of Australia will kick-start the day. There is no estimate for a change in rates however it will be interesting to see how the bank view the economic response to lockdowns and fiscal and monetary stimulus following their huge intervention, like other countries.

The AUD has gained steam over the last few weeks, likely due to the effective lockdown and measures put in place by Australia however the underlying monetary policy is very dovish. When risk subdues, it is likely we’ll see a continuation of the downtrend in the Australian Dollar.

Data surrounding employment will be critical and the market is likely to respond to that.

Wednesday 3 June 2020
Like the RBA the day before, the Bank of Canada is expected to leave rates on hold, however, an increase in monetary stimulus should not be ruled out. Like other countries, the focus will be on employment data and how public health responds to the easing of lockdowns.

The Canadian Dollar had a positive May and this has continued into the first day of June however that underlying monetary policy, like the Australian Dollar, is still very weak.

Any hawkish comments from the BOC should push CAD much higher, such as reaching the 1.3520 area in USDCAD and 81.60 area in CADJPY.





Thursday 4 June 2020
The European Central Bank are also likely to leave rates on hold on Thursday, possibly adding to their already huge QE programme though.

Like the previous currencies mentioned, the underlying monetary policy is extremely dovish so any further Euro gains should add further opportunity to be short in crosses.

EURUSD and EURJPY pairs are likely to rise to 1.1240 and 121, respectively. Any solid price action around these levels could provide a good opportunity to get short; it would be prudent for a signal that the trend may reverse down first however, such as a lower high.

I am currently in a short EURCAD from 1.5350 trade following a reversal off the underside of a key resistance area, a weak Euro due to a dovish ECB, and a neutral CAD due to the BoC removing their easing bias at the last meeting.

Hey Jake,

Just stumbled onto your thread and it definitely resonates with the my style of trading (fundamental directional bias with entries off key SR levels).

Really enjoy the posts, hope you keep it up!

Cheers

Smack