Fundamental Trading Opportunities

Most large hedge funds look for fundamental trading opportunities when taking a trade.

All of the best traders in the world are fundamental traders - Soros, Druckmiller, Paul Tudor Jones, Bruce Kovner.
These guys all plan their trades- this is something I very rarely see being done on Forex Factory

The CFTC did a report on who are the best traders in the world - and traders that used fundamentals beat everyone (market makers, high frequency traders, & technical traders).

Typically, this can involve trading into or out of an event.

These events can be:

Central bank policy statements
Speeches by heads of state
Trade events (Brexit/NAFTA,US/China)
Important data releases
Elections

On to this we need to factor in

Geopolitical risks and interest rate bias of the central banks

So what do we look for - upcoming events - we need to prepare for them.

This is what large hedge funds do...everything is planned- when they enter and where they exit.

Additionally, I follow certain people/companies:

1. Jane Foley (Fx analyst of the year)
2. Charlie McElligott (closely followed on Wall Street)
3. Goldman Sacks (always listen to)
4. https://www.goldmansachs.com/insight...s/markets.html

When they talk the market listens.

These are the resources I look at:

https://www.forexfactory.com/calendar
https://www.bloomberg.com
https://uk.reuters.com/
https://www.efxdata.com/

Basically we need to get a handle on where an economy/sentiment is at- and then monitor it - and then wait for opportunities to occur.

Our aim - to never lose. We need to stack the odds so much in our favour we will very rarely if ever lose.

This is the main way that SMB Capital trade - and they are one of the most successful prop shops in the world

**What I find really useful is to create an event timeline - so we can monitor how currencies are performing- this alone gives us a massive edge **
**We are looking to stack our reasons for taking a trade**
**We need clear sentiment - and a level and time to trade from**

Until then we just monitor the currencies - to get in sync with sentiment

Some rules:

a) Always post the fundamental reasoning before posting a chart.
b) No swearing
c) Always be respectful

The most important rule of all - is buy low and sell high- and set your targets
After you have made your pips - walk away- take a break
Then re- analyse

The reason why we look at fundamentals - it cuts through the noise- it gives you a bias.

Great idea! I'm looking forward seeing some helpful information here.

UK:

Geopolitical

Everything opening up - all positive news
Data releases
PMIs beat estimates- this is positive

The main thing to look out for is:

a) Reinfections- R rate in London .95- so we need to keep an eye on this.
b) Brexit negotiations

Levels of interest

1.2550 POC
1.2700 Resistance

Interest Rates

Latest BOE Statement

https://www.bankofengland.co.uk/mone...2020/june-2020

There was no talk of negative interest rates, and 1 member voted against the assets purchases

So this is positive for the pound

Where we are now- Cable

Price rallied from Sunday night- from a POC- things were starting to turn
However, the banks are fairly bearish on Sterling
1.2550 will be key- its only 20 pips away

IMM speculators are now more bullish on the pound

Carry wise - there is plenty of upside potential for the pound

USA:

The main issue has been that the US was acting as a safe haven- and there has been significant flows between the US and Japan. There was a point in March where gold and bonds and everything else was being sold. At the moment the dollar is under pressure. When Goldman Sachs tell people to sell the dollar - it's usually wise to comply

Interest Rates

The Fed are very accommodative atm
They are concerned about:

Economic outlook
Infection rates
Unemployment rates
Inflationary pressures

https://www.federalreserve.gov/newse...y20200610a.htm

PMIs have missed, estimates for this week seem to be better
Infection rates - have increased (perhaps due to demonstrations)
Inflation missed and -.1%

The repo rate was "tweaked" - which was slightly bullish for the dollar

https://www.reuters.com/article/us-u...-idUSKBN23I39Z

Below is the FOMC countdown tool

https://www.cmegroup.com/trading/int...n-to-fomc.html

Geopolitical

US/China trade discussions still dominate.
Seems to be going ok.

US election in November- this is going to be bearish on dollar

Very Well....
subscribe please.

Update

RBNZ were dovish last night - this had an effect on other risk currencies. Really I should have spotted this....

82% of the time the stock market following a major triple witching day results in a down week in equities (according to McElliott)
The S&P had been slightly more + over the last 2 days... credit market bearish atm

Cable hits the POC for that main move- although fell shy of the 1.2550- I did say that many of the banks are bearish on Sterling
We did have a warning yesterday when there was a sell off from the UK PMI figures

Also I do note that many of the US estimates this week are higher than previous - so this could put some more pressure on cable.

I see Haldane speaks tomorrow - he was a disenter. He is likely to provide support to Cable- but I will need to go through his reasoning to be sure

https://citywire.co.uk/wealth-manage...ramme/a1369809

We do have some key levels below- that I have marked up on a chart

Obviously, this is not the clearest of narratives- however, it is a fairly accurate description of where we are at.

What we are looking for is clear sentiment and a decent price/level- nothing else.

If we see it so will every single macro fund manager in the world

Ok - got 45 pips on this trade
Unable to break previous high -
+ forthcomming estimates on the dollar
- news on risk currencies- (RBNZ), bearish banks with itchy fingers

I am expecting more selling- perhaps from a higher level
However, there was buying at that level- that I sold into

Price rallied up to a higher level - and is now selling

Interesting video here - really well worth listening on market makers
This is the reason why you have pull backs in trading

Got loads of pips today …so tomorrow:....

Haldane- The thing about Haldane is that he chops and changes his mind.

He was talking about how bad unemployment is - and then dissents!

But he is the BOE economist and is influential over Bailey.

So I presume that tomorrow he is going to talk about how we are seeing economic activity starting to return.

He mentioned it here last month.

https://www.bankofengland.co.uk/even...-daily-webinar

He speaks here (virtually)

https://tedxglasgow.com/tedxglasgow

Lots of US figures due tomorrow-at 1.30pm

The only thing is he speaks at 6pm - and London shuts at 4pm

But we should get some sort of response - assuming he sheds light on his decision

Nice thread, I just now saw your repley!

'All of the best traders in the world are fundamental traders - Soros'

I agree for some degree; right now fundamentals dont really mean much though; ist all about good feeling for sentiment. I need to remember you the big losses Soros made trading the Pound. I look up for you the story; It was long time ago; cant remember the event anymore. You're including sentiment later; good to see. Best traders have good feeling for both

Its always nice to understand fundamentals; it can make the way you trade much easier. I only make the big trades usually having such a story in the back of my head. Im I? No, also many when you feel sentiment quicklty changed for some reason. Right now I prefer to say fundaments dont mean much these days; first the China deal story for long time making the main direction, now its all about the covid developments. Sure the big beat reagarding last NFP produced the good feelings but it could have been destroyed minutes later reading Trump dumped the China deal. Off course its geopolitical; is it?

Did you remember me some time ago about Jane Foley? Yes she is great analist indeed. I tried to look for her analises but I got stuck somewhere. Which way you can follow her??

Big banks mentioning something; its best to do the other thing most of the times lol. The French are really bad adviseres; cant believe they mean the things Im reading many times. Barclays often got it right regardiing cable; dont know for the other asset classes(I only traded cable for long time)

Not that long ago I remember Vlieghe was very closely watched; he was the one triggering the last rate raise idea back in 2018 I think it was. He didnt deliver last year on his comments but it was close call for some cut. I rember all scheduled calender items very closesly watched giving great momentum for some time. Its nice to understand why they were so hot for some time. Making trading much easier sometimes!

Looking forward!

Hi Despichtt,
Agree sentiment is so important- getting in sync with what's being traded.
With the big banks - if they are all bearish - 95% of the time I will be as well and vice-versa
But I will factor in fundamentals & sentiment.
They are bearish on Sterling - and that has been driven down from 1.2540 ish
But I like to see accumulation - so that it ties in with this bias
And even though they are bearish - we have to know where from
Regarding Soros - agree he has made a few pretty poor trades. But I know he gets out them quickly.

In respect of Jane Foley- I think you have to be a client to get the information- or the odd interview on Bloomberg
Thanks for the pointers on Barclays- I like Nomura and UBS as well
With central bankers - I like it when they change bias - from say neutral to hawkish...
Even better if its from the govenors

Well I have no idea if Haldane spoke or not. Nothing came through on my squawk feed.

Right end of month stuff...Citi are advising the sell the UJ and buy Cable and the Euro
1.2450 is the max pain level on the Cable futures contact
Plus the way we have moved lower....seemed just to get some buy orders
But they need buyers are higher prices...
atm back at fair value
so lets see...

UK

Bailey;
speaks on Monday at 10.30am. He has said more will be done if there is a second wave. But that negative interest rates are way off atm.
PMI's have improved. Manu orders poor though. Consumer confidence - poor.

Infections:

With all this easing going on - and the fact that very few people wear masks in the shops- I would not be surprised to see infections increase in the UK. Manchester & Leicester are having issues. Leicester might actually be subject to lock-down- this will definitely be bearish if it happens.

Politics:

Brexit negotiations start this week - A negative+ Boris talking about an Australian deal with the EU- negative
Boris is going to announce a massive rebuilding programme. + sentiment.

Options - very bearish atm. Support at 1.2300 and call prices have increased further otm

Bank Action

Book balancing according to Citi- rotations from equities to bonds going into month end (bit of this on Friday) and long UJ, Cable & Euro

Banks - still bearish

USA

Further infections in the USA- shocking really (people must wear masks)
POTUS issues

Data - US data estimates look positive

China - new infections

Structure- On Cable we are at a POC- which is a buying area, plus there is meant to be some book balancing going on. (Personally- I can't see much of it - but I presume that Citi know what they are talking about.)- Still hold some shorts at 1.2500

FA Conclusion-

The main trade is going to be short equities and long bonds (balancing)
If bonds buying spree from 12pm UK time- going short equities around 1pm
Have some limit orders around the POC. As of Thursday there was $75 billion worth of equities that needed to be sold- and the same amount purchased in bonds. There was a load of selling on Friday- but I am expecting more. Plus the increase in the infection rates and locked down potentially being introduced in certain states and Trump/Biden election issues - not good for stocks

Not sure how much Cable needs to be bought for book-balancing. Does not look a lot to me...
The expectation is that things are going to be really bad for the pound- as regards Brexit - everyone is short (the institutions are short in futures and spot and they have hedged in cheap otm calls). Perhaps if we can get a drop to 1.23000 this will give support/defence for some buying. The other thing that bugs me is further rotations from bonds into equities.....that could be due on Monday and Tuesday - this will give a risk-off sentiment to Cable. The other interesting thing is that they drove price down on Friday into the 4pm fix. And it bounced from there. So that is an important level.
So perhaps more range bound.

On Wednesday, once this is over from a valuation perspective - long oil needs to be checked out

Bailey is only doing opening remarks at the financial risk forum..so maybe he won't say much

I was just looking allready called session earlier; not a singel word anywhere again lol, just like last time. It produced a bit of a spike 1130h Berlin time though

You have long position running something? I had 2 beatifull scalps earleir; very happy ))

Might shop the whole head of later if you ask me when bad headlines USA start running agin. I have a break and zoom in 1500h again

GL

Hi despichtt, well done
For me on equities - there no risk in the market.
And they have not really bought that much in bonds.
And I looking through various parts of it-can't see anything screaming for a buy on bonds
So won't be trading equities

Update on Cable

Bounce off the 4pm fix - said that this was important
they drove it to 1.2300 level - but was defended.

But pretty sure US traders might have a go selling Cable from higher levels
Especially when the PM - uses words like "catastrophic"

Right they finally started buying bonds and selling equities at the US cash open
Took a small position...
Bit of risk showing up - so lets see