The Real Fundamental Analysis

[BeSomebodyFX]

A bit more context…

The price action today I think is a bit indicative that Dollar bulls are reaching their limit.

Wait.

Let me show you something:

This is from BofA and it highlights that USD longs right now are the most “crowded” trade right now.

What does that mean?

Means that too many are bullish on the Dollar, and too many are long on the Dollar.

Leaving small room for further gains unless there’s a new fresh catalyst to shift the fundamental context further in favor of USD bulls.

So?

So yes.

The price action today across Dollar pairs I think is indicative of the fact that the USD long side is too crowded.

Which means?

Which means it’s worth being careful with either EURUSD shorts or any other Dollar long right now as they could be near a short term turn.

Just a thought for now, but a bit of context into one of the reasons why the EURUSD shorts were squared in profit earlier today.

@BeSomebodyFX

Just took profits on the EURUSD shorts.

Will share when there is something actionable to take.

[BeSomebodyFX]

Alright guys.

Sorry but I see this thread has now been moved to the commercial section for some reason.

I guess this type of content is not much welcomed?

If that’s not the case please let me know, and also let the admins know.

I would be happy to continue updating frequently here but the commercial section feels a bit of a downgrade.

Let me know.

[BeSomebodyFX]

I guess commercial section it is.

Will keep the thread updated anyway as I’m sure it will still be useful to many of you here.

Anyway…

@BeSomebodyFX

The price action today across Dollar pairs I think is indicative of the fact that the USD long side is too crowded.

Which means?

Which means it’s worth being careful with either EURUSD shorts or any other Dollar long right now as they could be near a short term turn.

It’s been Dollar weakness after Dollar weakness since then.

Not surprising.

Will update when there is a clean setup to take.

[BeSomebodyFX]

Ok.

RBA rate decision tonight and it’s an interesting one.

Why?

Because it is evident that the RBA will opt for a 25bps hike based on how inflation in Australia surprised expectations earlier in October…

And on top of that…

The RBA has a new governor which will likely want to show a strong hand in the first rate decisions.

So a 25bps hike tonight seems VERY likely.

If that’s the case then the AUD will pop 30 or 40 pips higher across the board at the rate decision.

Not a lot, but still.

Now with that said…

Let’s put a plan on a chart as usual.

From a technical point of view, I like AUDNZD longs:

Do NOT expect the RBA to be the single catalyst to push this all the way to the full target.

No.

But again, if they go for a 25bps hike it should be enough to get at least to the first targeted liquidity.

From there will see whether it’s likely to break higher or not yet.

Will update along the way.

[BeSomebodyFX]

Quick update…

Not the ideal scenario with the RBA.

Yes, they hiked 25bps.

But they tweaked their statement just enough to raise doubts on whether more hikes will be needed or not.

Here’s Bloomberg on the matter:

The above is a snippet from a Bloomberg article.

And yes.

That’s a bit of dovish forward guidance which pushed the AUD a bit lower on the event.

Nothing too big anyway.

Still on AUDNZD longs but the next couple of sessions are important.

I want to see the pair move back above 1.0880 to confirm that it’s going to resume higher.

If it doesn’t, the trade will be cut early.

[BeSomebodyFX]

@BeSomebodyFX

Still on AUDNZD longs but the next couple of sessions are important.

I want to see the pair move back above 1.0880 to confirm that it’s going to resume higher.

If it doesn’t, the trade will be cut early.

No technical confirmation to hold the position so stopped the AUDNZD longs earlier.

Will update when there’s another trade to take.

[BeSomebodyFX]

CPI from the US tomorrow.

Not much to expect heading into it.

Here’s what most models are saying:

Most are expecting a release fairly in line with consensus which is 3.3% for headline, and 4.2% for core.

So not a lot to do with this right now.

Will see if we get something interesting after the numbers.

[BeSomebodyFX]

@BeSomebodyFX

Will see if we get something interesting after the numbers.

Alright.

Look at the CPI numbers from earlier today and you will know the overall fundamental direction across the board for the next month at least.

Quite a meaningful print…

That cements the idea that the FED won’t need to hike any further.

And that obviously matters.

With that said…

The market has moved a lot already on the numbers.

So nothing to jump on right now that has a good risk reward.

Will share when there’s an actionable setup to take.

[BeSomebodyFX]

A bit more details into the fundamental context guys…

Let me show you something interesting:

The snippet above is from BofA and it illustrates the dominant fundamental sentiment right now.

In other words…

The FED is done hiking.

If you follow this thread regularly or if you know something about fundamentals you know what that means.

That’s bearish for the Dollar.

And that’s the ongoing overall context right now.

@BeSomebodyFX

Look at the CPI numbers from earlier today and you will know the overall fundamental direction across the board for the next month at least.

Currently USD pairs have already moved a lot since the CPI release, so waiting for some corrective structure to form before positioning.

Will update with a chart and more details as usual when there’s a clean setup to take in the fundamental direction.

[BeSomebodyFX]

@BeSomebodyFX

Will update with a chart and more details as usual when there’s a clean setup to take in the fundamental direction.

Alright.

Long GBPUSD looks interesting now.

Seasonality is bullish for the pair and overall bearish USD over the next couple of weeks.

The fundamental context strongly suggests further Dollar weakness ahead since the soft CPI…

@BeSomebodyFX

Look at the CPI numbers from earlier today and you will know the overall fundamental direction across the board for the next month at least.

And Friday printed a solid bullish engulfing on the daily chart.

Seasonals, fundamentals, and technicals, all aligned.

Here’s the chart with an actionable plan:

That makes a trade.

Will update along the way if anything changes.

[BeSomebodyFX]

@BeSomebodyFX

Look at the CPI numbers from earlier today and you will know the overall fundamental direction across the board for the next month at least.

That’s what the fundamental context does.

When you know the context, you know in which direction the market is likely to trend to.

And you when you know that, you know where you should position.

But at the same time…

You also know where you shouldn’t position.

That way not only you can get the right trades, but you can also avoid getting stuck into the wrong ones.

It’s the classic “follow the trend” more or less.

Except that you are not just following the trend, but rather following the fundamental sentiment which shapes the trend…

So you know where the market is likely going to trend because you know the dominant fundamental sentiment.

And that’s the real fundamental analysis.

It’s NOT about analyzing every little detail about a country.

It’s NOT about some complex combination of economic data and indicators.

No.

It’s about understanding the sentiment and story that is driving the market right now.

And evaluating whether that sentiment is likely to continue or not.

@BeSomebodyFX

If there’s one VERY important aspect to understand about fundamental analysis is that it is about narratives, stories, and sentiments.

Think about it this way…

When the market is trending there is ALWAYS a fundamental story driving that trend.

Understanding why the market is moving in that direction and understanding the logic of that story driving the trend tells you whether you can expect the market to continue moving in a certain direction or not.

That’s how it works.

[BeSomebodyFX]

@BeSomebodyFX

Here’s the chart with an actionable plan:

That makes a trade.

GBPUSD doing its thing…

No reason to expect a change of this sentiment and as a result no reason to expect a change of the ongoing trend.

[BeSomebodyFX]

@BeSomebodyFX

Here’s the chart with an actionable plan:

Price action a little choppier but…

No change in fundamental context.

Still expecting a continuation higher.

[BeSomebodyFX]

@BeSomebodyFX

Here’s the chart with an actionable plan:

Almost there with GBPUSD:

And…

The fundamental context right now keeps suggesting further Dollar weakness ahead this week.

So this has potential to extend even higher to 1.2750 as soon as this week.

[BeSomebodyFX]

Alright guys.

A bit more details into the fundamental context.

So…

What’s driving the USD across the board?

@BeSomebodyFX

Let me show you something interesting:

The snippet above is from BofA and it illustrates the dominant fundamental sentiment right now.

In other words…

The FED is done hiking.

If you follow this thread regularly or if you know something about fundamentals you know what that means.

That’s bearish for the Dollar.

And that’s the ongoing overall context right now.

We talked about that already.

And I also went a bit more into its details in this post, if you want to dive deeper into it.

Now, is there any data coming up this week that can influence that story?

Yes.

The PCE on Thursday.

That is Powell’s preferred measure of inflation.

So it matters.

A lot.

But ok.

Let’s see what most models are pointing to:

3.0% for headline and 3.5% for core.

That’s overall in line with market consensus.

But…

Remember the CPI two weeks ago?

@BeSomebodyFX

Look at the CPI numbers from earlier today and you will know the overall fundamental direction across the board for the next month at least.

Yes, that one.

That was a meaningful miss on expectations.

So, it kinda sets the tone for a potential miss in this PCE print too.

Which would be?

Further… bearish for the Dollar.

Yes.

Inflation data looks to be set to print on the soft side.

And so the context is set for more Dollar weakness.

That’s the base case right now.

Of course, that would change if we see an upside surprise with the PCE numbers on Thursday.

Will keep you updated with any development.

[BeSomebodyFX]

@BeSomebodyFX

Here’s the chart with an actionable plan:

Alright.

GBPUSD done:

But…

As mentioned:

@BeSomebodyFX

The fundamental context right now keeps suggesting further Dollar weakness ahead this week.

@BeSomebodyFX

Inflation data looks to be set to print on the soft side.

And so the context is set for more Dollar weakness.

Likely this trend continues.

Something to keep in mind.

Because…

@BeSomebodyFX

That’s what the fundamental context does.

When you know the context, you know in which direction the market is likely to trend to.

And you when you know that, you know where you should position.

But at the same time…

You also know where you shouldn’t position.

That way not only you can get the right trades, but you can also avoid getting stuck into the wrong ones.

So don’t fight this Dollar weakness.

At least for now.

@BeSomebodyFX

Of course, that would change if we see an upside surprise with the PCE numbers on Thursday.

Context.

It matters.

Will update when there’s another interesting trade to take.

[BeSomebodyFX]

@BeSomebodyFX

So this has potential to extend even higher to 1.2750 as soon as this week.

1.2730 was the high of the week so far.

Meanwhile…

@BeSomebodyFX

Let’s see what most models are pointing to:

3.0% for headline and 3.5% for core.

That’s overall in line with market consensus.

The PCE printed exactly at consensus.

So not a lot to do with it.

Will update when there’s a clean and solid trade to take.

[BeSomebodyFX]

Alright guys.

CPI on Tuesday next week.

FOMC on Wednesday.

And SNB, BoE and ECB rate decisions right after.

Will share if any interesting trade opportunity comes out of it.

Keep an eye out for it.

[BeSomebodyFX]

@BeSomebodyFX

FOMC on Wednesday.

Alright.

Quick context update.

FOMC yesterday shifted the context back in favor of Dollar weakness.

Why?

Here’s Bloomberg on the matter:

Yes.

Rate cuts.

The FED is now officially expecting three 25bps rate cuts next year.

Which means…

They will do a lot more.

You know, the FED at the start of a new hiking or cutting cycle always tends to underestimate how many hikes or cuts they will deliver.

So the market is already MORE than three rate cuts.

But with that said.

For a bit of basic fundamental theory…

@BeSomebodyFX

Well, as usual with the FOMC the focus is NOT on the decision at the meeting itself but rather the forward guidance for what the FED expects to do at the upcoming meetings.

The FED communicates its moves in advance so well that the actual decision is already well priced in and expected BEFORE the event itself. So the focus is instead on what the FED is prepared to do after.

@BeSomebodyFX

It’s hawkish if the FED talks about the need to do MORE monetary policy tightening, so more rate hikes.

And it’s dovish if the FED talks about LESS monetary policy tightening. So right now… if it expects NO more hikes.

Again, simplifying there.

But you get the point.

Alright.

The fundamental context is now quite bearish for the Dollar again.

And, seasonals are quite bearish for the USD over the next couple of weeks.

So two important elements aligning for more Dollar weakness into year end.

That’s all there is to know right now.

And why is that important to know?

Because…

@BeSomebodyFX

That’s what the fundamental context does.

When you know the context, you know in which direction the market is likely to trend to.

And you when you know that, you know where you should position.

But at the same time…

You also know where you shouldn’t position.

That way not only you can get the right trades, but you can also avoid getting stuck into the wrong ones.

Simply…

Keep the fundamental context in mind.

Will share a chart and more details when we take action, as usual.

[BeSomebodyFX]

@BeSomebodyFX

Will share a chart and more details when we take action, as usual.

Nothing actionable yet.

For a bit more context:

The snippet above is from BofA and it’s a good illustration to show that the bearish USD sentiment is short far from being crowded.

So there’s still room for the sentiment to grow and fresh positions to be added to allow the bearish Dollar trend to continue.

Also…

I mentioned seasonals:

@BeSomebodyFX

And, seasonals are quite bearish for the USD over the next couple of weeks.

So let me show you some stats that prove what I’m talking about:

Above you can see how AUDUSD in particular historically behaves over the next couple of weeks.

It’s evident how it’s consistently up over that timeframe.

The same is true for EURUSD, NZDUSD, and many other Dollar pairs, tho slightly less consistent than AUDUSD.