Fundamental Analysis

Thank you for your intelligent analysis.

As always a very clarifying explanation. You're the man, thanks a lot mate.

Some early signs of weakness in USD:

- GDP Growth slowed sharply at the end of 2015

- Unemployment rate remains at long term low: 5%
- Underlying labor market indicators: Wage Growth, Participation Rate, Job Vacancies etc. still indicate strength in the labor market

- Inflation moving towards target, but forecasts moving lower
- Producer Prices Change (leading indicator of inflation) still below zero

Growth, Unemployment & inflation:




Business confidence seems very weak.
ISM PMI, Chicago PMI & Services PMI:




Consumer Confidence appears strong, but is not yet reflected in Retail Sales:




"FOMC feels that in 2016, the jobless rate will dip below 5% as part of the process that will correct inflation" - Currency Thoughts, Dec 16

"The economic recovery has clearly come a long way, although it is not yet complete" - Yellen, Dec 17
Dec 2015 hike will be followed by "Gradual tightening as we watch for signs of higher inflation" - Yellen, Dec 17
"We expect that, with gradual adjustments in monetary policy, growth will continue at a moderate pace and labor market indicators will continue to strengthen" - Yellen, Dec 17

"We suspect the US dollar will be off to a positive start in 2016 plenty of scope for rates markets to price in more hikes" . BNP Paribas, 24/12/15

"Some FOMC members saw December rate rise as a close call" - FOMC, Jan 7
"Some members concerned that inflation expectations may have already moved lower" - FOMC, Jan 7

"March rate hike may be on the cards after impressive NFP report" - Marketwatch, Jan 9

"Drops in CPI, Housing Starts, Retail Sales, Production, Exports and Manufacturing Surveys indicate a significant slowdown at the end of 2015" - reuters, Jan 20
"The broad-based nature of the decline in inflation is likely to temper the feds outlook for inflation" - TD Securities, Jan 20
"Underlying fundamentals however suggest there is more room to run; lending conditions for residential mortgages continue to ease" - Wells Fargo, Jan 20

"FOMC is closely monitoring global economic developments and assessing their implication for the labor market and inflation" - FOMC, Jan 28
"Labor market conditions improved further even as economic growth slowed late last year" - Yellen, Jan 28
"We still project inflation will rise to 2% over the medium term but will remain low in the near term" - Yellen, Jan 28

"The FOMC statement was reworded to signal increased concern about global economic development" - HFE, Jan 28
"Every single change to FOMC's Statement suggests they are more worried about inflation and less likely to hike in March" - BK Asset, Jan 28
"Changes in FOMC statement implicitly means that risks are tilted to the downside" - Bloomberg, Jan 28
"Fed still expects to hike rates at a 'gradual' pace while watching to see how the global economy and markets impact the US outlook" - Bloomberg, Jan 28

Far from a recession however putting certain uncertainty about march's rate hikes. What are you thoughts about it mate?

Hi numbnuts,

Thanks for starting this thread and the links you provided. I have been studying FA the last 2 months and slowly i am starting to understand it a little bit.
I like your way of displaying the economic indicators with the comments of different articles next to it. It makes it easier for me to see where the economies are at the moment.

The biggest problem i have at moment is determining the current sentiment per currency and the risk-on / risk-off sentiment effecting more currency's
Can you tell me more about how to detect sentiment changes?

As i understand it at the moment the current sentiment on the dollar is bearish but the underlying fundamentals are still bullish. I found a piece of an article from BK assat management that gave the reason for the sell off.

"It has been a crushing day of losses for the U.S. dollar. The greenback shed more 1.7% and in many cases close to 2% of its value against all of the major currencies. The magnitude of today’s decline is what we would expect from a central bank rate decision or non-farm payrolls and not from a day with only ADP and non-manufacturing ISM scheduled for release. Of course the reason why the dollar experienced such steep losses is because Fed President and FOMC voter Dudley said market turmoil may alter the Fed’s growth outlook and that financial conditions are considerably tighter now than in December. His comments overshadowed the ADP report and set off the initial round of dollar weakness. When the ISM non-manufacturing numbers printed lower, the dollar tripped stops and shot to new highs versus many of the major currencies. Dudley’s comments and the ISM report are a wakeup call to investors who may have been distracted by easing abroad."

Am i right in assuming that the sentiment will remain bearish until there is some good news about the dollar.
Lets assume that i want to go long on the dollar, what are the potential sentiment changers? If those potential sentiment changes occur then what can i do to confirm/gauge that the sentiment really changed to gain conviction in my trade?

How can i recognize risk-on/risk-off sentiment from normal sentiment?

Those are from me currently the most mysterious topics that confuse me and are not very well explained in most available educational sites.

Regards,
Nik