Sentiment analysis course
Just like candlesticks cover different timeframes sentiment does too. There is always an underlying long term sentiment and there is a daily sentiment.
When studying sentiment we try to answer 1 question only; Is it good for future growth or is it bad? Sometimes there is no strong bias and that is absolutely fine.
Sentiment analysis focuses on current perceived value of future events. Thankfully it’s less of an art and more like ploughing through articles and checking data. Always focusing on the main theme. There is no interpretation needed it should stand out and be very clear what market participants are thinking.
Before we start with the tutorials there is 1 distinct difference between sentiment analysis and technical analysis. The difference lies in the recourse utilised to draw information from. For analysing sentiment we use top news wires such as bloomberg, reuters and respected market analysts and their accompanied commentaries. There is subscription based sources that gather all necessary information and data into one accessible package and there is free available material. Any and all of our sources should echo 1 clear tone.
Tutorial 1
Top news headlines:
-Surprise U.S. election win for Trump
-Dow rises on the back of more fiscal stimulus plans from president-elect Trump
-Liquidity shifting from Asian bonds to U.S bonds
-U.S 10yr yield up more than 8bp(basis points)
-BOJ (bank of japan) monetary policy remains dovish
All of those headlines send one very clear message: USD is extremely bullish and YEN is under pressure.With sentiment favouring US dollar and yen negative there was only one path for USD/JPY and that was up.
These headlines and more USD supportive data dominated news wires after the election and sparked a buying frenzy that sent USD/JPY up 1200 pips over a period of 3 weeks. With a strong positive U.S. sentiment doors opened for bulls to keep bidding this pair up.
Tutorial 2
Top news headlines:
-Opec members meeting to finalize deal on oil production cuts
-Oil rising on the back of a potential production cut
-Commodity traders eyeing WTI $50 in the wake of Opec meetings
-Eurozone under pressure from Italian Referendum, Italian pm Renzi will resign if he losses
-World’s oldest bank and 3rd largest bank in Italy Monte de paschi di siena suffering from mountain of bad debt
-Gov. Poloz (Bank of Canada-BOC) comments that rising oil prices lifting pressure on central bank to make any monetary adjustment in the near future
These headlines have been in traders ears over several weeks. As the Canadian dollar closely follows oil prices with a possible production cut and no monetary adjustment from BOC the path of least resistance was up. Following recent developments in the Eurozone, Italian referendum and bank collapse pressure, euro was getting sold hard across the board.
EUR/CAD dropped over 1000 pips in the run up to the Opec meeting and a further 100 pips on the day of the meeting upon reaching a production cut. With continued negative sentiment for the Euro and very bullish sentiment for Canadian dollar. Traders took the pair down.
Tutorial 3
-High Court decision due today on invoking article 50 (UK’s PM May, wants to trigger article 50 and follow through with a swift and hard Brexit, however parliament believed they should have a say on how and when this should happen and lean towards a soft Brexit)
-It’s been heard one of the ruling Judges said that the people (ie; parliament) should have a say on invoking Article 50
-UK economy has been extremely resilient in the wake of the Brexit vote and continued better econ. data is keeping GBP buoyant
-Canadian dollar has been somewhat subdued as of late, dominated by ranging oil prices
GBP/CAD has suffered an overnight flash crash a month ago but since then has traded up. Sentiment is overall weak on this pair but with the high court decision ruling leaning towards a parliamentary approval this pair is gaining traction.
High court ruled in favour of parliament and MP’s approval. On the back of this news GBP/CAD leaped 130pips instantly and another 200pips the following trading sessions.
