Rules of Fundamentals changed? Case study: EURUSD

Okay I posted this on another thread but in order not to derail the OP’s thread I started this on.

I need help

Please explain to me if the laws of the universe have changed.

Red/Bad data for currency suggests weakness. As yesterday’s news release was “bad for USD”, how come we had no uptrend on EURUSD?

Shows the danger of trading ahead of news. The usual story would normally be that this news was already in the price - the big players had already driven the USD down and the EUR up in anticipation of this news, there was no or very little further position adjustment required.

Of course, this is always just a story from the financial commentators anyway and there’s no guarantee they have got the facts of the matter.

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Trading ahead of news? I’m confused, care to explain :worried:

I mean opening a long position before the news announcement in anticipation it will be good news or a short position in anticipation it will be bad.

There are people who do this. But they don’t tend to be around long.

big institutions more than often drive the price down before doing any buying

The theory behind OBV is based on the distinction between smart money – namely, institutional investors – and less sophisticated retail investors. As mutual funds and pension funds begin to buy into an issue that retail investors are selling, volume may increase even as the price remains relatively level. Eventually, volume drives the price upward. At that point, larger investors begin to sell, and smaller investors begin buying.
from .investopedia.com

All in good time.

Maybe watch the big short movie - especially on Michael Burry and Scion - gives a sense on market FA and timing.

I wouldn’t really say a news release is fundamental analysis. It was slightly worse than expected, but not a huge amount.

Why do people seem to think that EUR is due a rally? I don’t see much underlying strength in it. The Italian economy is kaput and they won’t stay within the budget that the EU dictates, or even the one that they agreed. They are in big trouble and one of the biggest economies in the Euro. Greece still have a ridiculous national debt that hasn’t really dropped in 8 years. No deal Brexit is a risk to the economy, but also a big funding gap that needs to be filled to keep investment going. Germany’s economy isn’t producing good figures recenetly. France has political unrest and a pretty hefty national debt. The countries with major economies are all having shifts in the political spectrum where they’re fed up with paying for smaller countries to benefit at their expense so anti EU sentiment is growing. Statements from the ECB aren’t hawkish.

None of this points to the EURO being strong as far as I can see.

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Quite so - It is important to understand that every “pair” has TWO participants - not just one.

I understand your explanation, but I think it does not work like that all the time.

Your explanation fits the scenario when an economy is weak. For instance, the EURO could be weak but that could change in minutes especially when you look at a Currency Strength Metre.

The more I understand these things, the more confused I get. :worried:

A currency doesn’t suddenly get strong without some fundamental reason behind it. That may be an unexpected data release, but a sudden good data drop from the EU isn’t going to improve all of the problems that I mentioned and more. The big boys won’t suddenly start buying into the EURO unless there’s some underlying reason that they think it will be bullish

What can you say about GBP and USD strength right now?

Edit: Better still EUR and AUD. EURAUD is in an uptrend and from your explanation the numbers are not so good for the EURO.

I just had a like reminder of a post back in Jan 2018.

The number one rule of FA is context - check GBP/USD (cable) since Jan last year:

No, but read up about Australia, they’re in a mess too.

Hmmm… Euroland is done for it seems.

So at random the 2 manufactures in the block - Italy and Germany.

Italian manufacturing pmi thus far 2019

ItalyMfctrPMI

What about Germany, it’s pmi are reported languishing - this is true but perhaps go back a little further for context:

DEMfctrPMI

All well and good, but countries such as Greece, Spain etc - sunny services are a huge part of their economies - simple way the market will check is the services pmi for EZ:

ServicesPMIEZ

I have chosen pmi because the market looks to the purchasers for guidance on what is down the road - on the other hand the algos pay little attention to journalist’s headlines.

Anyways always good to think.

Should have added that images are from tradingeconomics who do a great service to the industry.

Since the original post was ref Eur/Usd and i have shown the current pmi’s on Euro, then perhaps check services and manufacturing pmi for US here:

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Finally - current context:

What you are seeing here and now is the result of Trump wars with everyone else for example. That’s why you see the united states of america dollars something like 1.14 even while it was something like 1.11, correct ? Thanks in advance for that.

Nope, what you are seeing is a guy who knows how to negotiate and how to use 21st century tools to help him (even though you younger guys think that us older guys have no know-how)