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Fundamental Analysis

  • #21
  • Jan 7, 2016 1:21am Jan 7, 2016 1:21am
AUD and NZD are both getting crushed by Chinese weakness, Yuan devaluation, weak commodity prices & global risk aversion.

http://www.bkassetmanagement.com/dai...devalues_9031/
http://www.bloomberg.com/news/articl...st-intensifies

At this stage the safe haven JPY is the biggest beneficiary, due to worldwide uncertainty about oil prices, Saudi/Iran conflict and N. Korea acting like a dick.

These currencies have already made substantial moves in the last three days but the fundamental drivers of those moves aren't going away in the near future - in fact they are more likely to create even more drivers, starting with weaker terms of trade and more dovish central bank language.
si hoc legere scis nimium eruditionis habes
  • #22
  • Jan 7, 2016 1:31am Jan 7, 2016 1:31am
Quoting numbnuts
AUD and NZD are both getting crushed by Chinese weakness, Yuan devaluation, weak commodity prices & global risk aversion. http://www.bkassetmanagement.com/dai...devalues_9031/ http://www.bloomberg.com/news/articl...st-intensifies At this stage the safe haven JPY is the biggest beneficiary, due to worldwide uncertainty about oil prices, Saudi/Iran conflict and N. Korea acting like a dick. These currencies have already made...
Great THREAD
  • #23
  • Jan 7, 2016 1:51am Jan 7, 2016 1:51am
Quoting jpwtrade
Great THREAD
Thanks man, glad you like it
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  • #24
  • Jan 7, 2016 3:16am Jan 7, 2016 3:16am
Some things for currency traders to watch in 2016:
By Larry Greenberg

http://currencythoughts.com/2016/01/...watch-in-2016/

- Brazil, China and Russia - with generally strong growth for the past decade - outlooks now range from ominous to uncertain
- US Presidential election - Democrats and Republicans have wildly differing visions and policies, much more so than usual
- Governments and central banks are assuming that oil prices will gradually recover
- Inflation rates in US, Japan and EZ are lower than their 3 year averages
- BOJ and ECB, in contrast to the Fed, are expected to maintain stimulus through much of 2016.
si hoc legere scis nimium eruditionis habes
  • #25
  • Jan 8, 2016 6:52am Jan 8, 2016 6:52am
Hi numbnuts

I saw a video of Jarratt Davis "How to trade Forex fundamentals from a long-term perspective."He broached the subject in a generic way stating "The key is to find two central banks with the most extreme opposite policy ..."
I ask please tell What do you think about this topic? how to proceed, verify that data, etc ..

Kind regards
Julio Bento
  • #26
  • Jan 10, 2016 2:06pm Jan 10, 2016 2:06pm
Quoting jjibl
... I ask please tell What do you think about this topic? how to proceed, verify that data, etc .. Kind regards Julio Bento

Hi Julio

Trading with diverging Central Bank policies is a key part of my trading, but it's only one piece of the puzzle. When a central bank changes direction, or adjusts interest rates, often the move has been anticipated and "priced in" to some degree .... but when you combine CB sentiment with a basic economic analysis, as I'm doing in this thread, it isn't hard to anticipate central bank moves.

One rule to remember is that a central bank will never, ever become dovish when an economy is healthy, and it will never turn hawkish when an economy is struggling. So when economic indicators/global macro situations are signalling a healthy economy, I look to go long on that currency, when they are showing signs of trouble I go short on that currency. Central Bankers look at those same things, and based on that information they tighten or loosen monetary policy which changes the value of their currency.

Never mind what conspiracy theorists and crackpots tell you - central bankers, especially those at the top of their field, are very intelligent, their primary job is to monitor the health of the economy and they are extremely good at what they do.

My approach is to have two lists - one list with healthy economies/hawkish central banks, the other list with struggling economies/dovish central banks, and only trade the pairs consisting of one currency from each list. So if (for example) you are bullish USD and GBP, and bearish EUR and AUD, you would only trade four pairs - short e/u, a/u and e/g, long g/a. I only trade pairs which involve one bullish currency and one bearish, in fact I only have those pairs loaded into my trading platform - I don't even look at other charts.


Hope this helps
si hoc legere scis nimium eruditionis habes
  • #27
  • Jan 10, 2016 2:56pm Jan 10, 2016 2:56pm
Inserted Video
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  • #28
  • Jan 12, 2016 11:10am Jan 12, 2016 11:10am
Wow, awesome thread, FA is definitely one aspect of my trading that I need to learn and dedicate time since I trade based on auction market theory. Could you kindly inform me on where to start learning it?

best regards
  • #29
  • Jan 12, 2016 6:12pm Jan 12, 2016 6:12pm
Quoting fuzz
Wow, awesome thread, FA is definitely one aspect of my trading that I need to learn and dedicate time since I trade based on auction market theory. Could you kindly inform me on where to start learning it? best regards
Hi fuzz

I listed a few resources in post #12 that should get you started - if you are new to fundamentals I recommend making a habit of reading the daily "piponomics" blog at babypips ... keep reading it every day until it starts to make sense:
http://www.babypips.com/blogs/piponomics

Informed Trades also has good video series on macroeconomic fundamentals:
http://www.informedtrades.com/f7/


Good luck
si hoc legere scis nimium eruditionis habes
  • #30
  • Edited 8:01pm Jan 12, 2016 7:06pm | Edited 8:01pm
Chinese trade data is being released today, a surprise could have a big impact on it's future activity.

Don't be fooled by the fragile recovery:
http://www.bkassetmanagement.com/fea...recovery_9049/

- "China is still in trouble and poised to bring more pain for financial markets"
- After devaluing it's currency several times, China is still threatening more intervention
- Chinese impact on NZD and AUD should overwhelm other inputs


China can't stop big moves in currencies:
http://www.bkassetmanagement.com/fea...rrencies_9051/

- AUD and NZD have traded lower on China weakness, today's trade data will help determine if those losses are sustained
si hoc legere scis nimium eruditionis habes
  • #31
  • Jan 12, 2016 9:28pm Jan 12, 2016 9:28pm
Hi numbnuts. Just wondered whether you still apply the money management method you outlined in your thread http://www.forexfactory.com/showthread.php?t=309126 in your trading these days? Thanks
  • #32
  • Jan 13, 2016 4:00am Jan 13, 2016 4:00am
Quoting numbnuts
{quote} Hi fuzz I listed a few resources in post #12 that should get you started - if you are new to fundamentals I recommend making a habit of reading the daily "piponomics" blog at babypips ... keep reading it every day until it starts to make sense: http://www.babypips.com/blogs/piponomics Informed Trades also has good video series on macroeconomic fundamentals: http://www.informedtrades.com/f7/ Good luck
Thanks man, I'll check those resources out
  • #33
  • Jan 15, 2016 12:07pm Jan 15, 2016 12:07pm
Hi Numbnuts,

Yes I am here to learn your expertise,
Love to read your posts., very informative
And Mind-Opening. Subscribed.

Take care and GOD bless you.
loveandpeace
  • #34
  • Jan 15, 2016 12:44pm Jan 15, 2016 12:44pm
The easiest, and most reliable way to trade based on fundamentals is to simply look for central bank divergences. Once you have that, you have the key to trading long term fundamentals. Look at how the NZD, AUD, and CAD have all weakened over the past year.

On the flip side, look at the gains in the U.S. Dollar and GBP over the past year / year and half. Match these together and you get huge trends forming, simply because of central bank divergences.
  • #35
  • Jan 15, 2016 2:59pm Jan 15, 2016 2:59pm
Quoting jakeparkin
The easiest, and most reliable way to trade based on fundamentals is to simply look for central bank divergences. Once you have that, you have the key to trading long term fundamentals. Look at how the NZD, AUD, and CAD have all weakened over the past year. On the flip side, look at the gains in the U.S. Dollar and GBP over the past year / year and half. Match these together and you get huge trends forming, simply because of central bank divergences.
Where do you look for this central bank divergences?
  • #36
  • Jan 15, 2016 11:41pm Jan 15, 2016 11:41pm
Quoting jakeparkin
The easiest, and most reliable way to trade based on fundamentals is to simply look for central bank divergences. Once you have that, you have the key to trading long term fundamentals. Look at how the NZD, AUD, and CAD have all weakened over the past year. On the flip side, look at the gains in the U.S. Dollar and GBP over the past year / year and half. Match these together and you get huge trends forming, simply because of central bank divergences.

You are right, but getting the timing right using monetary policy alone is very difficult. If you start buying when a CB raises rates and start selling when they start cutting, you'll find you've already missed most of the move .... and when CB's announce the end of a tightening/easing cycle, the trend in price has sometimes finished up to a year beforehand.

You can anticipate these moves, instead of following them by reading trends in economic data as well as monetary policy ..... for example if a central bank says something like "We must keep unemployment below 8%" - and two months later you realize unemployment is about to hit 8%, that is the best time to start selling, not after the central bank has starting its easing cycle.

Take another look at the trends you mentioned ..... look closely at when those moves started and ended. The beginning and end of those trends only loosely coincided with shifts in CB policy, but they more accurately coincided with changes in economic data which the central banks used to adjust monetary policy.
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  • #37
  • Jan 16, 2016 10:59am Jan 16, 2016 10:59am
@Numbnuts

The key is the CB policy yes. If you wait for the move in rates, as you said, you'll miss it. As soon as the CB shift their stance on what is going to happen with monetary policy, that's when you make your move.

Attached Image (click to enlarge)
Click to Enlarge Name: NZDUSD.PNG Size: 53 KB


As you can see from this example, the recent downtrend in NZDUSD started on the 30th April 2015. On the 29th April 2015 was the RBNZ Rate Statement. In this statement, they stated that they were looking at easing measures due to many different economic concerns. The statement before this one didn't mention any of this. Extremely simple stuff but, as you can see, our downtrend starts. We're now trading 1200 pips lower, and that's just that pair.

@danjuma

Simply look for the CB statement when it is released. The calendar here on Forex Factory tells you when it is due. Look at the previous one as well as the one that's just been released. If the new one has a stance shift, then you have your reason to trade. Trust me, it'll move the currency.

If you need any other help don't hesitate to ask.
  • #38
  • Jan 16, 2016 11:26am Jan 16, 2016 11:26am
Quote
Simply look for the CB statement when it is released. The calendar here on Forex Factory tells you when it is due. Look at the previous one as well as the one that's just been released. If the new one has a stance shift, then you have your reason to trade. Trust me, it'll move the currency.

Many thanks.
  • #39
  • Jan 20, 2016 3:54am Jan 20, 2016 3:54am
BOC: To cut or not to cut? That's the question. What do you think numbnuts? I bet you're strongly paying attention to today's news action . And given recent OIL action things may become even more dovish for the CAD IMHO.
  • #40
  • Jan 20, 2016 4:35am Jan 20, 2016 4:35am
Quoting fuzz
BOC: To cut or not to cut? That's the question. What do you think numbnuts? I bet you're strongly paying attention to today's news action . And given recent OIL action things may become even more dovish for the CAD IMHO.
I have no idea if they will cut or not .... Poloz has been stubbornly optimistic but oil is definitely continuing to take a hammering, with no end in sight, and Canada's leading indicators aren't really starting to point north. GDP Growth is falling .... Unemployment is rising ..... Producer Prices Change is still below zero ... Business Confidence and PMI's are down .... Consumer Confidence is the only thing looking healthy, but actual Retail Sales are still falling. It's all painting quite a depressing picture.

BOC will either turn more dovish or stand pat, but turning hawkish in this environment would be absurd - so shorting CAD is kind of a low risk/high reward bet IMHO. I don't really like trying to guess what central banks will or won't do at each meeting, I prefer to play low risk/high reward opportunities like this.
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