Since I know little to nothing about how fundies affect forex (I’m trying to learn…) I was wondering if someone could post a simple list that could serve as a quick reference … sort of like this:
Oil up = dollar weaker
$ up = jpy weaker, oil down, stocks up, bond rates up
US market down = jpy currency down (usually)
Gold up = dollar weaker, euro weaker, swissy stronger
and so on … the above may not even be correct, I got if from some notes I have made in the past.
Maybe it could be a work in progress with many contributing what they know or have observed, including news like jobless claims up = $ weaker, gold stronger … or whatever. Or maybe there is a website that has already done it.
I don’t want explanations as to why … just a quick reference & of course other factors might influence, but at least a starting point to begin understanding the relationships.
Also including inter-currency relationships, I already know euro stronger usually equals chf stronger (so their charts will often run exactly opposite to each other) but what about nzd, aud, cad etc … how do they relate to each other or other pairs?
If this makes any sense, maybe someone can post a few quick-reference relationships & others can add to it. Once there is enough information, I can organize everything into one tidy list (I hope) and repost it to help other newbies get started with a basic understanding of how fundies affect the pairs.
I asked a similar question on a different forum and got this reply:
Risk tolerance as measured by the performance of equity markets. If the Dow, Nasdaq & S&P 500 finish higher, followed by a rise in the Nikkei and Hang Seng, then the mood going into the European open is generally positive, which is usually bad new for the yen. If US futures point to a strong open on Wall Street, then this is also a yen sell signal. If the Vix (measure of volatility) is low, then the yen generally does worse but if the Vix is running high, there is always the risk of a sharp reversal in currency markets, which will see the yen appreciate sharply.
Fundamentals. Strong economic data out of the US is bad for the yen, but weak data, which points to a requirement for lower interest rates in the US, is good for the yen and usually the yen crosses as it usually leads to a rise in risk aversion. Japanese economic fundamentals have practically no impact on the yen exchange rate, odd as it may seem. The only one to keep a fixed eye on is the CPI.
Commodity prices. A normal rally in commodity prices generally leads to a rally in the commodity currencies and benefits the carry trade and AUD/JPY, CAD/JPY, NOK/JPY and NZD/JPY. Major spikes in gold and oil however are generally the result of speculative hedges and can result in steep declines in USD/JPY.
Timing & positioning. Because of the interest rate differentials and the implied costs/earnings, many fund managers do not want to be long on the yen as we make the transition from the US to the Asian session. The yen can often fall significantly late on a Friday, particulalry against the high yielders, although recent volatility in markets has led to liquidation of a big number of positions going into the weekend.
OK, good start … so from that information it would be in shorthand:
US Markets higher + Asia mkts higher = European mkts higher = yen weaker
US futures higher = yen weaker
Vix low = yen weaker
Good US economic data = yen weaker
Weak US economic data = need for lower interest rates = yen stronger
Lower US interest rates = rise in risk aversion = stronger yen (fewer people try to short the yen by buying the USD/JPY)
Japanese economic data = no impact on yen, usually
Commodity prices up = rise in commodity currencies, AUD, NZD, CAD, NOK
Commodity prices up = more people in carry trades of commodity currencies vs JPY.
Gold or Oil up sharply = stronger yen, weaker dollar
Watch for yen to fall significantly into Friday close of trading.
That is the kind of thing I am looking for … and I hope I understood it correctly. I’d like to compile a list of 20-40 such relationships, organize them as coherently as possible & then it can be printed out and kept as a quick reference.
Keep in mind that market relationships such as the ones you have outlined are not necessarily persistent. They will change - often at exactly the worst possible time for your trades. If you’re going to have all those relationships in mind, you have to constantly be updating things. You will never just be able to print up a list and have it forever.
Thanks, I am aware of that, this is just a starting point to begin understanding the relationships between news/fundamental events and currency pairs, it is not meant to be something to trade off of
Yeah we need more people contributing here … even a sentence or two about some aspect of fundies that you know well, every piece of information will help build a list of relationships.
And I know it will be simplistic and not something to trade off of … but it may help newbies to see realtionships more easily without reading through pages & pages of … long winded explanations
Hi! Very interesting post since I was about to make a similar post myself…
I’m a newbie going true the pips school and it’s something that I realized that I will need help with since I understand that I need to have a mix of technical and fundamental analysis together before making a decision on a trade…
Anybody know a good fundamental analysis web site that puts it plain and simple for us newbie, that is up to date with the news and that we could refer to…?
Information I have acquired over the past few months… its will make fundamentals a bit easier to understand… at lest it does for me.
EUR
Positive correlation to gold, major player are Germany France and Italy
GBP
Strong correlation w/ energy prices
CHF
About 35% of the world�s cash is managed in Switzerland, large gold reserve= highly correlated to gold, Switzerland has a political neutral Gov which draws investors in times of uncertainty
NZD
Commodity Research Bureau(CRB) index, it has 50% correlation to gold, metals agricultural products = sensitive to droughts and severe weather
AUD
Gold and other metals- it has a 80% correlation w/ gold
CAD
US buys 85% of all exports, exports 1/5 GDP to the US, It is the 14th largest OIL producer, (5th largest) gold producer� it has a 60% correlation w/ gold
JPY
Depends on the metals from Australia and New Zealand, half of all sales are in the US, Heavily dependent on foreign oil(oil going up = jpy going down � cad going up)so it has a negative correlation to energy, it is the second largest importer of energy. Before the end of the fiscal year Japanese investors must bring back the money they borrowed and once the new fiscal year starts they can reinvest it once again in other countries. The biggest flow in occurs between December and march and after that if flows out. The BoJ purchases Yen in order to meet this demand during these times in turn it causes the Yen to strengthen and afterwards the BoJ sells the yen when the corporations and investors exchange their Yen for investments in foreign markets. export driven
Eur/Usd has a negative correlation to Usd/Chf, can be used to hedge one another
-oil prices-
UP=Jpy -Down
UP=Cad - UP
-gold- considered a safe haven in times of turmoil, chaos and uncertainty
This is good, pipraider … exactly the sort of thing I was looking for. Hopefully others will add similar information, then i will compile it into something really simple to look at & understand.
Once again, this is not information to be used for trading, just to help new people gain a quick overview of how the various components affecting forex interrelate.
Hi 4XStar,
There have been a lot of good posts in answer to your questions about fundamentals.
It appears to me that you are interested in how various Governmental News releases affect the various currency pairs over the long run, or, maybe even the short run - like the first hour or so.
I have been recording live charts of a FOREX News Calendar since March of this year, it has been fascinating to say the least.
There are approximately 50 announcements each month (give or take 5-10) which can be traded with some likely probability of profitable results.
The reason for the probability is because there is a projection of what the announcement will be - with certain News announcements, if the prediction is way off, certain currency pairs move extremely fast, in the direction of the currency that is the beneficiary of the announcement.
Some of those coming up tomorrow:
09-24-08 -
4:00AM ET - EUR German Ifo Business Climate
6:00AM ET - GBP CBI Realized Sales
10:00AM ET - USD Existing Home Sales
I use FF�s calendar to watch for the news results, since it puts up a button about 5 minutes prior to the announcement - by pressing the button at or just immediately after the news release, it displays the result.
The best currency pair to watch for the EUR is EUR/USD, sometimes the EUR/GBP.
GBP is GBP/USD
USD is USD/JPY
Please let me know if this is of any help.
WOW lots of very good information here. I have looked for a while for the same type of list. I watch CNN and I can understand what is going on but I never can apply it to the markets. I did however discover that when the eur/usd pair is going crazy that normally USD/CHF is trading at a rather rapid rate in long positions. It doesn’t help me since i only trade one pair at the moment but eventually it will. Thanks for all the wonderful info, Happy Trading, Raven
Hi Raven,
Most currency pairs that I have observed over time which include the CHF, suffer a huge “dealer/broker spread”.
I believe there are two types of dealer/broker, one that has a "fixed spread’ and the other has a “variable spread”, my dealer/broker uses the “variable spread”, and the spread can be as much as 40-50 PIPS during the news announcement.
I have never traded a currency pair that involved CHF - perhaps your dealer/broker uses a “fixed spread”, either way, be aware.
Wow! 4xStar, that look very interesting and makes sense, so I hope to be able to corroborate at least some of this fundamental table (can we call it like that?)
