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Fundamentally speaking

  • #1
  • First Post: Edited May 12, 2011 3:04pm May 2, 2011 10:59am | Edited May 12, 2011 3:04pm
The purpose of this thread is to discuss the fundamental reasons for being long or short the different currencies in the long term (next 1-12 months) and hopefully help each other building an equity millipede by betting in the direction of the fundamental data. We will start by analyzing the USD. In the attached chart you can see some of the most important fundamental data. Based on those data and maybe some others that I haven't included are you bullish or bearish on the dollar?

The newest data are in the bottom
Attached Image (click to enlarge)
Click to Enlarge Name: United states.JPG Size: 62 KB
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  • #2
  • May 2, 2011 11:34am May 2, 2011 11:34am
You forgot to include the attachments?

Anyway, I'm bearish on many currencies, including the dollar and euro.

eurusd will probably continue to rise for a while longer, but bailing out Spain will become inevitable. Spain may be too big to fail, but might also be too big to rescue. When this debacle starts, eurusd will see a significant drop again - though I still believe the eurozone is fundamentally stronger than the US. Whatever happens, volatility will most likely remain high for these currencies.

Bullish about Swiss franc, the Norwegian and Swedish kronor, and to a lesser extent the yen. From an international competitive perspective, these countries may not be looking forward to a further appreciation of their currencies, and central banks may attempt to limit the appreciation. However, I feel that these currencies may currently be the safest to hold (together with the renminbi), and the central banks will have trouble withstanding the market forces.
The nail that sticks out gets hammered back in
  • #3
  • Edited 3:42pm May 2, 2011 11:40am | Edited 3:42pm
Quoting Noloqy
You forgot to include the attachments?

Anyway, I'm bearish on many currencies, including the dollar and euro.

eurusd will probably continue to rise for a while longer, but bailing out Spain will become inevitable. Spain may be too big to fail, but might also be too big to rescue. When this debacle starts, eurusd will see a significant drop again - though I still believe the eurozone is fundamentally stronger than the US. Whatever happens, volatility will most likely remain high for these currencies.

Bullish about Swiss franc, the Norwegian...
Why are you bearish on the dollar?
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #4
  • May 12, 2011 2:31pm May 12, 2011 2:31pm
Here are some stats for Europe. As you can see on your charts the euro has increased in value in 2011 but in the past week it has been falling. By looking at the fundamentals where do you think EUR/USD will go from here. I think the euro will continue to rise if CPI continue to stay this high but I am not sure because USA has a much higher GDP than Europe.
Attached Image (click to enlarge)
Click to Enlarge Name: Europe.JPG Size: 47 KB
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  • #5
  • May 12, 2011 3:00pm May 12, 2011 3:00pm
Good effort........I appreciate it.I shall try to follow and contribute something in this thread.
Regards.
  • #6
  • May 12, 2011 3:04pm May 12, 2011 3:04pm
Quoting Gambler180
The purpose of this thread is to discuss the fundamental reasons for being long or short the different currencies in the long term (next 1-12 months) and hopefully help each other building an equity millipede by betting in the direction of the fundamental data. We will start by analyzing the USD. In the attached chart you can see some of the most important fundamental data. Based on those data and maybe some others that I haven't included are you bullish or bearish on the dollar?

(please feel free to correct my grammar. English is not my native...
hallo Gambler,,..may i know where you get those data? is it free??
I will be the number one Manager.
  • #7
  • Edited 3:33pm May 12, 2011 3:18pm | Edited 3:33pm
Quoting javapips
hallo Gambler,,..may i know where you get those data? is it free??
The forexfactory calendar and these sites.
http://epp.eurostat.ec.europa.eu/por.../eurostat/home
http://www.bls.gov/home.htm
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #8
  • May 12, 2011 3:39pm May 12, 2011 3:39pm
Quoting Gambler180
The purpose of this thread is to discuss the fundamental reasons for being long or short the different currencies in the long term (next 1-12 months) and hopefully help each other building an equity millipede by betting in the direction of the fundamental data. We will start by analyzing the USD. In the attached chart you can see some of the most important fundamental data. Based on those data and maybe some others that I haven't included are you bullish or bearish on the dollar?

The newest data are in the bottom
your efforts are pretty good, however I think you miss a bit the point of fundamental analysis.

For example: your data doesn't take into account major world events like:

 

  1. problems with EU member states e.g. greece
  2. the USA with trouble to jumpstart the economy and trying to print their ways out of the problem, and government expenses being 40% already of the deficit. That might lead to hyper inflation
  3. earth quake and nuclear disaster in japan. Earth quake an rebuilding efforts will make the yen stronger, however the nuclear disaster might in the long-term make the yen weaker, due to weaker demand.
  4. commodity boom due to the ever growing appetite of china and india making the aussi a good bet, since australia is pretty connected with chinese economy
  5. unrest in middle east, as long as this continues, oil will not drop and rather rise. Good for cad.
  6. and so on

Now notice that I didn't use any data of your excel sheet. Just reading up in the newspapers, bloomberg and so on and try building a fundamental opinion and what investors currently focus on. The data in your excel sheet also has its place, but first and foremost you should get a good grasp of the world-wide flow of capital movements across all markets and the underlying risk appetite. That will give you a good start to be able to see which currencies will be affected.

my 2 cents

  • #9
  • May 12, 2011 3:47pm May 12, 2011 3:47pm
Quoting Custos
your efforts are pretty good, however I think you miss a bit the point of fundamental analysis.

For example: your data doesn't take into account major world events like:
[list][*]problems with EU member states e.g. greece[*]the USA with trouble to jumpstart the economy and trying to print their ways out of the problem, and government expenses being 40% already of the deficit. That might lead to hyper inflation[*]earth quake and nuclear disaster in japan. Earth quake an rebuilding efforts will make the yen stronger, however the nuclear...
With all that in mind what is your view on EUR/USD and why?
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #10
  • May 12, 2011 3:52pm May 12, 2011 3:52pm
Quoting Gambler180
With all that in mind what is your view on EUR/USD and why?
I am personally bullish on the eur/usd. (But of course that might change if something major happens)

Here my reasoning:
Since europe made another package for greece and said that it will under no circumstances drop greece, investors are a bit more comforted again.
Economically, germany and france are beginning to see their economy grow at a good pace. In the USA such growth is still missing.
The FED signalled that it will not increase interest rates in the near future, but the ECB will. So that also speaks for the euro.

Those are my major reason for being bullish on the eur/usd.

Edit: also the USA is involved in 3 wars it can't afford, another reason for being bullish on the eur/usd.
  • #11
  • May 12, 2011 3:59pm May 12, 2011 3:59pm
Quoting Custos
I am personally bullish on the eur/usd. (But of course that might change if something major happens)

Here my reasoning:
Since europe made another package for greece and said that it will under no circumstances drop greece, investors are a bit more comforted again.
Economically, germany and france are beginning to see their economy grow at a good pace. In the USA such growth is still missing.
The FED signalled that it will not increase interest rates in the near future, but the ECB will. So that also speaks for the euro.

Those are my major...
Why do you say that growth is still missing in USA? The annualized GDP is 3,1 % and in europe it is only 2 %. USA also has a lower unemployment rate than europe.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #12
  • May 12, 2011 4:03pm May 12, 2011 4:03pm
Quoting Gambler180
Why do you say that growth is still missing in USA? The annualized GDP is 3,1 % and in europe it is only 2 %. USA also has a lower unemployment than europe.
well, the growth might be greater in absolute terms. But compare that to the large deficit. I should have said, the desired growth is not there yet. The USA actually needs a much higher growth for being able to reduce their deficit and pay back its debt.

And it's also no secret how the USA calculates their unemployment rate. Anybody without a job for a certain amount of time will be dropped out of the statistic of the unemployment rate. So, the actual unemployment rate is probably much higher than the official number.
  • #13
  • May 12, 2011 4:12pm May 12, 2011 4:12pm
Quoting Custos
well, the growth might be greater in absolute terms. But compare that to the large deficit. I should have said, the desired growth is not there yet. The USA actually needs a much higher growth for being able to reduce their deficit.

And it's also no secret how the USA calculates their unemployment rate. Anybody without a job for a certain amount of time will be dropped out of the statistic of the unemployment rate. So, the actual unemployment rate is probably much higher than the official number.
I had forgot about that
According to this website the real unemployment is much higher
http://www.shadowstats.com/alternate...loyment-charts
On the daily EUR/USD chart a pinbar has just formed. Maybe it is time to buy
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #14
  • May 12, 2011 4:16pm May 12, 2011 4:16pm
Quoting Gambler180
I had forgot about that
According to this website the real unemployment is much higher
http://www.shadowstats.com/alternate...loyment-charts
On the daily EUR/USD chart there is a pinbar. Maybe it is time to buy
I restrain myself from calling trades, but I think that might be reasonably low risk for a good reward. Just make sure to hold on to that trade for a couple of months (if it works out). So that your profits will be able to pay for your losers.
  • #15
  • May 13, 2011 3:19am May 13, 2011 3:19am
Quoting Gambler180
I think the euro will continue to rise if CPI continue to stay this high but I am not sure because USA has a much higher GDP than Europe.
You have to remember to add herding into the equation. The markets are still moving in bubble-mode, they've been that way since way before the crisis. If you've ever had microeconomics you know that supply and demand are constantly trying to find an equilibrium. A rise in demand will increase prices and if there's no additional supply coming on to the market, this demand increase will lead to a demand destruction and bring prices back to the original equilibrium point (this is very visible in the pattern of US gasoline prices). When markets act in a bubble like fashion, an increase in demand and prices leads to a further increase in demand. Silver's recent performance is an excellent example, although with silver there's a very considerable lag on the supply side. But you don't need to look at silver necessarily, pick out any high beta equity, commodity, currency or what have you and you will see the same kind of action.

In normal market conditions prices should be dictated by supply and demand but this fundamental relationship seems to have broken due to financial engineering which has led to a decrease in interest rates across the board. It started a long time ago with the inception of index funds, money market funds and so on. The crux of it is that it has become very difficult to earn a decent yield with low risk so investors are herding into assets that fit their yield preference but are way riskier (of course they make sure they 'eliminate' risk, but we all know what that looks like).

So in short I would like to say that don't underestimate the herding mentality. Fundamentals are still important but as long as there's plenty of liquidity sloshing around and real interest rates stay negative (official interest rate minus inflation) you can expect to see the demand for yield to dominate market movements with risk on/risk off dictating a particular session's movements.
If you don't risk, you don't ever have to lose.
  • #16
  • May 17, 2011 5:36am May 17, 2011 5:36am
Today the CPI number for the UK was released. The number was higher than expected and GBP/USD rose more than 45 pips in the first minute after the news was released. I think the reason for the rise in GBP/USD was rate hike expectations but the BOE inflation letter that was puplished an hour later doesn't give reason to expect a rate hike anytime soon. You can read the letter here http://www.bankofengland.co.uk/monet...tter110517.pdf. It is especially this phrase that makes me think they won't increase interest rates. "The MPC judges that attempting to bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term." By "quickly" i think they mean by raising interest rates.

Here are some other stats for the U.K. What are your views on the UK economy. Are you bullish or bearish?
Attached Image (click to enlarge)
Click to Enlarge Name: United kingdom.JPG Size: 46 KB
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  • #17
  • Jun 8, 2011 6:50pm Jun 8, 2011 6:50pm
It seems like a lot of people here either don't care about the fundamental data or don't do long term trading.
If slaughterhouses had glass walls, everyone would be a vegetarian!
  • #18
  • Last Post: Jun 9, 2011 8:41am Jun 9, 2011 8:41am
Quoting Gambler180
It seems like a lot of people here either don't care about the fundamental data or don't do long term trading.
I think there are people here who take fundamentals into consideration. I am one of them. But as I found out on another thread, there's no point in discussing these things on a public forum. There's absolutely no intelligent feedback (XXTRIZLEXX was an exception) and it looks like people are more interested in arguing about minute details than the big picture and the impact of those news. As far as I'm concerned I've decided not to talk fundamentals in this place again. I hope your thread will do better but I wouldn't set my hopes up high. Good luck to you, Gambler.
If you don't risk, you don't ever have to lose.
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