Forex economics-my conclusion

After spending some time studying forex fundamentals/economics i've realised that if a currency/pair is trending, then there are obviously fundamentals driving it.

What i realised is that no fundamental will always have the same affect in the market, one year the carry trade could be the cause, the next year it could be high and consistent GDP,commodities, etc.

That means that if there is a trend from time X to time Y that during X and Y there are certain fundamentals driving that, and won't be the same year after year. Even if GDP is high and consistent, the trend in a currency may be down, for example low interest rates cause selling due to carry trade investors.

In other words, whenever there is a market trending, look for the fundamentals which agree with the trend, as they are possibly the drivers of it , and pay attention to those variables and make sure they keep up. But economics isn't always a perfect science and even if you have all the variables lined up something else could , COULD, effect/reverse the trend.


meh.

And of course the key to making big money is predicting changes in these fundamental drivers. Like we saw yesterday- flight to quality, i.e. US Treasuries, drove the dollar up big despite the economic weakness and declining US interest rates. This was the theme for the first 3 quarters of 2009, and the trend seemed to have changed before the abrupt shift yesterday.

I agree with you..The way to look at it is that the market always move because of fundamentals on a large timeframes. Its on these movements we need to find appropriate entry and exit points using technical analysis.

generally fundamentals drive the same.. just like equities earnings drive growth .. growth drives inflation ... inflation drive interest rates.. interest rates drive carries.. when growth diminishes and interest rates are still high and carry is still active it unwinds.. they all lag earnings... you gotta remember they are all relative as well.. so u have to look at the base as well. But all u need is interest rate divergence to profit..

Markets are all fundamentally inter-correlated.

Driven by market sentiment, when the Risk appetite is high ( people feeling confident in the market ) people invest in equities, stock market goes up, Oil , GBP & CHF go up , USD & JPY fall. People take on more risky assets.

When there is bad news, Risk aversion sets in, and the opposite happens.

Interest rate = health of economy
you are trading a strong economy country's currency with a weak one.

What I believe in doing trading analysis ( in a short term period ) is based on these hierarchy :
1. Big Breaking News.
2. Technical Analysis.
3. Fundamental Analysis ( include Economic Calendar News ).

The meaning is :
Technical analysis is not valid anymore if there is a big breaking news released.
Fundamental Analysis is driven by Technical Analysis.

Please correct me if I'm wrong.
Happy trading.

Fundamental Analysis is the analysis of Fear & Greed in the markets.

Technical analysis is the tools to measure and quantify that.

Technical analysis is similar to weather forecasting, because of historical such & such condition it is likely to snow / rain. All about probabilities.

Why not use both ? Back up your TA with Fundamentals.

Thank you. I'll do that.