Fundamental Analysis and Trading

Nothing more to say. Discuss fundamentals here.

A useful thread is the cross market analysis thread found here:
http://www.forexfactory.com/showthread.php?t=493230


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Some opinions...

I have been a bit baffled by the market lately which seems to be chopping around a lot.

In spite of clear policy differences between the US and Europe and Japan, and clear differences in economic recoveries the dollar has been losing a bit of momentum. We also have other countries, such as Greece, whose stock market has experienced one of the worst sell off's in it's history, down about 20% on the week. That screams to me dollar strength but it is not what we have been seeing this week.

The move down in USDJPY prompted me to close out all USD related positions on Monday. My faith in the USD strength continuation has been rocked and I have taken to reassess that theory, as a result I haven't looked to open any positions this week. Simply put there is something going on I don't understand so I'm standing back.

However today someone on another forum I visit mentioned oil. We have all surely noticed that oil has fallen about 40% since July, but I hadn't made the connection with the forex market. Oil is of course globally priced in dollars. The global oil industry was worth last years something akin to 5 trillion dollars in trade, so one would expect that decreases in oil prices could have a significant impact on USD strength.

The guy on the forum believes that lower oil prices, with weaker demand means less trade in USD dollars, less dollar reserves required to buy oil and that obviously puts downward pressure on the USD - I thought it was an interesting observation, one I hadn't thought of. It makes sense to me as well, which is important because it allows me to envisage numerous scenarios that could unfold in the future.

That is the great benefit of forums like this.
You have many thousands of people expressing opinions and sometimes you find something really interesting that you would not have thought of on your own. Hoping to learn from you guys.

Please sir write in more comperhensive way i feel so dommy this way i prefare to google meaning of words
Have a nice day

I hate when guys throw around big terms lol.

Better that it is made as simple as possible.

Nothing really happening, supposedly the market thinks that the ECB will start their own quantitative easing program next year. Which sets us up for going higher in euro if it is not announced (at least temporarily).

I think the yen is the only other interesting one. Not much of a move after Abe re-election, but it was predicted he would win with ease. Will be interested to see if he is more aggressive in his printing policy in the future, will that move the market much. Long term I suspect yes, short term with all this stuff about oil going on... I don't know. I'm still a buyer of usd/jpy if it moves back to 1.21.

Edit - the FOMC meeting, there is not expectation of a rate change. But there is an expectation of a change of tone from Yellen and co, there is a belief that they will remove the phrase 'interest rates should stay low long term' from their press release which would by the FEDs way of saying expect a rate hike sometime soon.

Yeh I think you are right.

Everything is messed up at the moment, I don't really know what is going on, I think anyone who is honest with themselves can admit that too.

But the volatility has ticked up a notch, volatility at market highs (such as the SP-500) tends to be a bad sign.

US policy decision tomorrow is going to be key, if monetary policy indicates rising interest rates that will set the trend for the coming year. Because on the one hand you have countries like the EU and Japan deliberately weakening their currencies to spur growth and ward of deflation, yet on the other hand the US is doing the direct opposite. That stark policy difference, and stark differences in their respective economic performance makes me believe a much stronger dollar is on the cards. That is my main hypothesis, however oil throws a spanner in the works.

An alternative hypothesis (from the gold bugs) is that monetary policy tightening by the FED which will cause a US recession which will lead to QE4 for two reasons, firstly in efforts to prevent a recession and secondly to counteract the deliberate weakening of currencies by other countries i.e. a currency war with a race to the bottom. They posit that with QE4, it will unleash another gold bull market as paper currencies around the world are wrecked. I'm not convinced by that argument, for a start I think the US won't follow the others down the toilet, but I won't just dismiss it either.

This was posted in the cross market analysis thread recently, seems like Aws1962 was right. Unfortunately unless you have a bloomberg terminal you wont get these kind of insights.