Generally speaking and under normal market conditions, are the following assumptions correct?
Interest rates up = exchange rate up
Inflation rate up = exchange rate up
Employment rate up = exchange rate up
GDP growth up = exchange rate up
Budget up = exchange rate up (?)
Trade surplus up = exchange rate up
Trade deficit up = exchange rate downWell, even with a “normal” market, it’s not necessarly true. If you look at employment date, it’s more about what the market feels it’s better for the economy at a time.
Plus, I don’t think it’s relevant to think today according to some “normal market conditions”. There won’t be anything normal in any market for 2009, and maybe for 2010 too.
I agree…we’re in for some interesting times. I always read the forex news reports with interest - being new to forex fundamental analysis I wonder which, if any, general guidelines can apply to current markets, and to, well, “normal markets” as well. Not that I want to trade the news, but it would help to take these factors into account when looking for longer-term trends.
I suppose the trick is to look at it holistically and see how one development can impact another, so on and so forth, until a general conclusion can be made?
To be honest, I am far far away from making reliable predictions. I guess many people see that differently but I am not so sure about general conclusions.
Some correlation between news can work at a specific time but won’t work at another time. Is there a way to make general assumption with that ? Don’t know.
I try more to be an avid reader to get a clear understanding of what the market is thinking. Thus, I follow the trend : I obviously miss opportunities because I am not a first mover but when I define my orders, they fit with the majority of traders, aka the ones making the market move.
Fundamental traders are wack :mad:
There are some key issues when trading news:
The fact that you can’t or just don’t know how to perform a good fundamental analysis it’s not a reason to believe that everybody has the same problem.
Hwo do you perform a good fundamental analysis? Let me guess, by waiting for the news to come out! hahahahahhaha! I am always positioned for what the news will do days before. How about that! Fundamental analysis is wack and it only serves to warn you of big moves but it doesnt tell you the direction the market will go and anything else is just guessing.
Good luck!
Hi! I am also interested to know how to do fundamental analysis on Forex. Anybody here who can suggest start up books to read? Thanks! 
Interesting analysis… But I do agree in a way, they seem to only affect the long term trend, which is very important, therefore, so are fundamentals…
unfortunately it�s not something that you can instantly grasp just from reading a book or two.
you won�t become familiar with fundamental analysis overnight. It will take determination & discipline to study & interpret, which is why most folks don�t bother trying to learn, preferring to dismiss fundamental analysis as some kind of irrelevant inconvenience.
there are limited (abbreviated) reports & analysis sheets that are compiled via Bank & Bureau related sources available to the retail community, you just need to get your ‘search head’ on & go look for them.
both Bloomberg & Reuters publish regular (summary) sheets, as do one or two of the Investment Bank units. I�m sure you can dig up items of interest if you look hard enough!
i can�t offer you any of the publications or daily sheets we utilize unfortunately, as they�re subscription (password protected) items.
but if you�re interested in persuing this line of analysis I can assure you it will pay handsome dividends when used in tandem with your technical tools.
all the professional operators (both Bank & Institutional divisions) major on fundamental input across the whole spectrum of their strategy modelling.
not necessarily.
you can witness the effects of fundamentals at play from the near-term price action also, particularly when players are waiting for additional confirmatory information.
the vast majority of institutional (speculative) money is geared more toward intra-week positioning.
they’re constantly juggling value v/s risk & because they use technicals to time their fundamental views, they’re seeking validation that their positions are ahead of the (price) curve.
that’s why you often witness knee-jerk reaction to skewed intraday data releases. All that’s occuring is re-positioning and/or balancing of positional play.
intraday economic releases either confirm ongoing positional bias or they encourage firms/banks etc to re-balance their risk portfolio’s accordingly, including their hedging allocations.
that exercise takes place in both the short-term & medium-term timeframe structures.
[B]Market updates for the day[/B]
To end the week in Asia, traders scurry to the security of the so-called ‘‘safe haven’’ the currencies of US and Japan, amidst inferior equities spread from the US to Asian markets. With prosperity of depressing data to go around, counting horrid Japanese Industrial Production and employment data in Asia and deprived durable goods, and employment in the US, traders looked at the worldwide recession as worsen. Currency of US and Japan dropped like a stone through the session, falling from original highs of 90.14 to lows of 89.19 as the hours passed. The EUR/USD made similar moves, opening near 1.2946 highs and gradually grinding to lows of 1.2881 before steadying out ay 1.2900 by London’s open. Overall, both the Dollar and Yen victimized the Euro today while ECB members sustained to talk in circles about the destiny of Europe’s single currency. EUR/JPY opened close to its highs of 116.65 and chop down to just a pip under 115.00 over the day. Later we have the Euro Zone CPI and employment data to watch.
Other currency pairs of note, GBP/USD declined with the stronger Dollar, affecting from near 1.4300 to just less than 1.4200 before bouncing 50 to end the session. The AUD and NZD both originally dropped, but both managed to make up about half of their losses by the end of the sessions. Australian Dollar and US Dollar were at 0.6480 up from a 0.6423 low, New Zeeland and US Dollar were near 0.5125, up from session lows of 0.5076.
[B]Upcoming Economic Data Releases (London Session):[/B]
1/30/2009 7:45 FR Producer Prices (MoM) DEC -1.90% -1.10%
1/30/2009 7:45 FR Producer Prices (YoY) DEC 1.60% 0.30%
1/30/2009 9:30 UK Net Consumer Credit DEC 0.8B 0.7B
1/30/2009 9:30 UK Net Lending Sec. on Dwellings DEC 0.7B 0.6B
1/30/2009 9:30 UK Mortgage Approvals DEC 27K 26K
1/30/2009 10:00 EC Euro-Zone CPI Estimate (YoY) JAN 1.60% 1.40%
1/30/2009 10:00 EC Euro-Zone Unemployment Rate DEC 7.80% 7.90%
you know ive been starting to delve into the fundamentals ever so slightly. I see there relevance and for now im focuse od market sentiment and how price could change direction. I think fundamentals go much deeper and also can alter technical setups. I don’t know enough to post intelligently but I am interested in understanding more of the economical conditions of the countries whos currencys im trading/
To me fundamentals is a little like all or nothing.
It’s such a huge research subject that one either puts in a lot of time and does it really properly - far beyond just looking at the next NFP or what have you, or you choose to avoid it entirely.
I’m a beginner in this, so I’ll not pretend to teach, but it’s hard for me to see that there could be any meaningful middle ground in this subject.
I will be looking to do the same as you, but for me it’s still much farther down the road. Would any of the experienced traders care to comment on how much work that needs to be put in to get an in depth view of fundamentals for a pair?
Finally, congratulations on starting that journey johnnykanoo, hopefully I’ll still be around in a while, and if I am, I’ll be following in your footsteps.
it�s difficult to say. Everyone is different in their ability to study, absorb & assimilate knowledge/facts/research topics etc.
we all learnt this stuff at Uni & during the stages of our training at the various positions we�ve held at Banks/firms along the way.
you can certainly familiarize yourself with the generics of what�s driving price relative to your favorite pairs, by following some of the bulletin sheets mentioned in previous posts.
there�s plenty of stuff available for those keen enough to roll their sleeves up & get hunting.
how much further into the mix you tread will be governed by your curiosity for what really drives the wheels of market structure.
although it appears a daunting task, once you get your hands dirty & begin slowly piecing together the various components of what makes each economy tick, & how they interact with other economies, you gain a wider appreciation of how the two (fundamental & technical views) compliment each other.
i�m in no way suggesting you require to have a College degree understanding of economics to succeed in this business, but it can certainly benefit those prepared to go the extra mile.
So how can newbies like me start to apply fundamental info together with technical analysis? Can someone advise me?
that�s where you have to put your individual stamp on in Ray, just as you do with your technical prep.
most of the hard work (detail) is actually done for you these days, via the collective reports & pertinent focus headers etc.
your job is to see how & where it slots into your particular strategy model, according to your specific trade aims.
just as folks express differing views on their technical research/analysis, so do they when they�re attempting to position their risk & exposure in tandem with their fundamental influences. It�s a timing thing!
as much as I�m prepared to aggressively promote the benefits of incorporating this aspect of market study into a persons preparation regime, that�s as far as I�m prepared to take it
that�s part of what separates the consistently high achievers from the rest.
call it an edge, call it a sharper, clearer awareness of what�s driving prices out there��.whatever 
The way I approached it Ray was to get the technical side nailed down,
then go looking for the fundamental side & slowly feed it in. Looking at
sites such as actionforex, bloomberg, CNBC etc. & a good forex calendar,
learning the “Geek speak” as it were.
Always being mindful of those who can move the markets in one way or
another.
Sometimes as well it’s a case of “missing the forest for the trees”.
“There is always somebody who thinks they can ice skate up hill” Wesley Snipes in Blade
:wishes: daydreamerforex
guys I don’t know if it will help anyone but somebody here posted a bunch of pdf and in them I found this one which describes all the fundamental indicators. Ill post a copy. I found it interesting and maybe it will be to some of you as well.
It seems like a good place to begin understanding fundamentally what moves the markets.