Elemental Fundamentals for the Temperamental

Welcome Babypipers!!!
There has been a lot of talk about technical analysis vs. fundamental analysis on this forum recently. I being the typical spawn of babypips don’t know a blessed thing about trading the fundamentals. Join me as I note important news events and find fundamental situations I can take advantage of in the wonderful world of forex. I am going to start slow and simple and will most likely not post trades right away until I have gotten my feet wet, unless something really lines up with my beloved technical trading.

My goal with this thread isn’t so much to become a fundamental trader as it is to learn a little more about how fundamentals effect currencies. If I am lucky I might stumble on a few things of value to incorporate into my live trading.

Feel free to join in on the discussion!

Cool… Ill be Interested to see your progress :slight_smile:

Nice, just in time for the NFP report! Looking forward to seeing how this goes. Good luck!

I’m inclined to focus more on fundamentals myself, as you can see from my daily economic updates, but I think technicals and fundamentals complement each other. Fundamentals just happens to play a bigger role usually when major reports are being released, like the NFP today. Make sure you watch your charts to see how dollar pairs usually react to this event!

And we all thought fundamentals were boring! SO APPARENTLY, NFP stands for a couple of things. Natural Family Planning-its like kamasutra only for Catholics- OR Non Farm Payroll-monthly report on jobs added. Thank you generic Google search for all the enlightenment!

Because this is a forex thread and I don’t want to get an infraction from the mods I am going to ignore my renegade google search results and stick with Non Farm Payroll. NFP Is a great way to start this thread off because it is a big currency mover. What this means is, if you go back through your historical charts and look at the first Friday of every month you can see some pretty wild price moves.

First Friday of every month? Today is Tuesday! Because of the government shutdown NFP is about three months late. This could be significant because it allows traders to take the momentum of nfp and push it through the end of the trading week instead of trading it and then taking a break for the weekend.

Now for a few boring stats. Last month… we were expecting to add about 180,000 jobs to the US market. This is a pretty small number and wont change the employment rate which is 7.3%. Being a noob I am keeping it simple and saying that if we get a number that is lower then that, it will be bearish for the US dollar.

How would I trade it? Well… I would be looking to sell the US dollar. I think that with all the US shutdown bull crap we didn’t help the job market at all. SO I would be looking for ways to SHORT the dollar. I normally only trade the cable or the fiber so I would be looking to buy one of these two pairs. From a technical standpoint I would be looking to buy the euro. I like the tight range its has posted for the last three days and I would be looking to buy in the bottom 50% of that range. I would be holding out for whenever the USDX reaches down around 79.00 simply for technical reasons. :slight_smile:

Disclaimer: If you actually take my trading advice on this I would suggest you look up the other NFP-Natural Family Planning-. Read the section on how to keep from conceiving children. The rest of the world/forum will thank you later.

Pipmart, did you trade your correct fundie, short term analysis?

The only difference with me (excepting the non forex stuff) is that I look to buy in the upper end of the mid range.

I figure, as in today’s case, that the market movers are buying around that area, i.e the mean, so in a sense by being in the slightly higher range I am trading a ‘breakout’ of their buying area.

I have tried so many times to be a buyer when price is going down, buying into the red candle, for me does not work.

A long time ago I heard a respected trader say he doesn’t buy when price is falling, ‘you are guaranteed to be in the trade when you are wrong’ he advised, he was right.

Buying more and more as the market goes down is sage advice when long-term investing in equities (ask Warren Buffet how it’s working for him;)). I agree with you that buying as the market is going down is a recipe for disaster when short term trading. As you pointed out, ‘you are guaranteed to be in the trade when you are wrong.’

When it works you’re brilliant :cool: . . .When it does’t :17:

Great thread. Looking forward to future posts

Hey peterma, I did trade it, although It was a position I took Monday in New York open. Euro 1.3670…

I know what you are saying about preferring to buy into a green candle rather then of a red one. In the longer term analysis or when I look at longer term time frames I always buy into the trend. Its these small ranges that I do otherwise.

I think I remember you had several posts a couple months ago about how the market will be in a strong move and then “pause” for a moment before continuing on at a high rate of speed. You like to buy at these pauses. This is what was going on today and if you look at a daily chart you can really see how Sunday-Tuesdays tight range looks much like one of these small pauses. I bought at what I thought would be the bottom of this range on Monday with the thought that I could take some small profit playing the range from low to high (this scenario didn’t work out that well) and still be in a position for a strong move up during nfp(this scenario worked). So I guess what I am really doing is buying into a long term move up by looking for short term lows…

I hope that explains what I am doing. Thanks for reading and showing interest in my thread. Your opinions/thoughts are always welcome.

Ain’t that the truth! Specially if you buy a few false break outs… Makes you think you can catch daily bottoms and tops…

Looks like the pairs reversed their NFP moves in the Asian session. Why the heck are traders reacting this much to China’s money market rates anyway? Makes me think they’re just looking for excuses to book profits…

It’s not money market rates; it’s about bad debt:

“Chinese news blind-sides growing global bullish cabal
The news that rocked the Asian markets – at least for the very short-term - was that Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, and its four largest rivals expunged in the first six months 22.1 billion yuan of debt that couldn’t be collected, up from 7.65 billion yuan a year earlier. Yes, that is a tripling of bad debt write-offs in one year.”

If you look hard enough there’s a reason for everything. It’s just hard to make money out of it though unless you’re positioned correctly before it is yesterday’s news.

Interesting thread…I will be following along. Shame that Pizza got banned though.

And this is how I made use of the move from that little nugget above…

Entry in trading log:

Date: 23-Oct-13
Position: Long
Fundamentals in favor: US debt issues, no tapering anytime soon, bad NFP, stable BOE policy, signs of recovery in Britain.
Fundamentals against: Risk off sentiment dominating after fear of Chinese bank defaults.
Technicals in favor: D1 trend, Recent H4 Impulsive move, H4 Support.
Technicals against: Latest H4 Impulsive move is against trade direction.



Nice trade. Do you always trade the pound or did you pick it over another pair today? Just curious as I bought the fiber this morning instead of the cable… I didn’t want to trade the pound after seeing how hard it had fallen during Asian and London ranges… turns out both trades had close to the same pip halls. lol

Initial Jobless Claims and Trade Balance are the big U.S. news coming out tomorrow. I think numbers will be as expected or worse then expected in both of these reports. This means the dollar is going to range around or fall even more.

When I made my predictions on NFP the other day I sighted the Government Shutdown as a reason for thinking the numbers would be bearish for the dollar. Looking back on it, I really don’t think the shutdown had much to do with it. Although the shutdown was definitely not a positive thing for the economy, I think, politicians are trying to blame any bad numbers back to that one event… When in reality, the shutdown had little or no effect on the working american in the private sector. Business continued as usual.

The economy here has, at the very best, been floundering. Its been doing this well before anyone thought there was going to be a government shutdown. So, I recant my first statement about NFP to say this. The Initial Jobless Claims report will come out with anything but bullish numbers. It may not be particularly bearish but it will defiantly not be bullish.

Trade Balance… this one Is hard for me to make a prediction on mainly because its the first time I have ever payed any attention to it. My first inclination is to say that the debt ceiling was raised so that would allow more room for a higher trade deficit. Not sure if this line of thinking is correct. Any thoughts on this one guys?

Hey salt-n-pipper, It could be that there was some profit taking during today’s trading. I know the pound did a pretty hard reversal but the euro only fell a little.

I do trade the EURUSD and am bullish based on fundamentals and the current D1 trend. However, since the pair wasn’t near any significant support yesterday I didn’t have enough technical justification to take a trade.

GBPUSD on the other hand was dipping straight into H4 support that I had marked on my chart earlier.

The speed of the drop in GBPUSD was troubling, but the reason behind it (Chinese banks writing off bad debt) didn’t seem like a game changer against all the good things going on for GBP and the bad ones for USD.

I was also interested in a NZDUSD long off a similar support level, but New Zealand is more exposed to the Chinese economy so was a bit more hesitant to take that one. Things turned out well for the Kiwi too though, especially bolstered by better than expected trade balance released today.

Sorry if the thought processes are all over the place. I am just starting to add in fundamentals to my mainly technical style.

Its been a while since I posted here. I took a mini vacations last week so I have been playing catch up. This week we are mainly looking at NFP on Friday as well as a fed statement. So it has the potential to be a wild one.

One thing I would advise for a newbie to do going into nfp (other then getting out of any open positions lol) is look at a chart and mark any very clear support resistance within 200 pips or so of where price is. Often during times of wild price movement these lows and highs get taken out fallowed by a fast reversal. I may post a chart up later this week and we can see what happens.

Another event not to be missed is the ECB press conference on Thursday, 7th Nov.

IMO the steep fall in EURUSD is partially due to speculators pricing in a rate cut by ECB after poor CPI and employment figures. If there is no indication of this happening there should be a quick correction upside.

Yeah… i bought it… haha but just for the technicals. Thanks for the fundie outlook. I wouldn’t have put the two together.