My Difficulties Performing Fundamental Analysis on Currency Pairs as a Novice Trader

S

skinny

Hi,
I recently finished Karen Foo's book, "Fundamentals of Currency Trading".

I'm still having difficulties performing fundamental analysis on currency pairs, using her methods and my own. Here is the full Dynalist document explaining my concerns (I like Dynalist best for writing and organizing my thoughts):

https://dynalist.io/d/z2eLzKdsyweFu74uNaeidfV-

Please read the entire document, but if you don't want to; my main concern is that I have been unable to find a clear method for performing fundamental analysis on currency pairs.

Thank you for your time and effort.
 
If you do not look on Exotics, it is all about the future of interest rates as carry trading takes effect here. So can look at overlay charts (say 1 hourly charts) from underyling currencies to their interest rate differentials, and if there are huge divergences that can tell you something about the fundamentals and (future). So the main thing and takeaway here are the interest rates of any currency. Because any (high impact) news and central bank speech is interpreted about the future of their interest rates too. So for me it makes sense to view these all according to shifts in interest rates (differentials) of any underlying currency.
 
Last edited:
You should read Adam Iqbals book (he was head of g10 fx at Goldman) instead.

Look up these concepts:
- international fishers effect
- carry trade
- interest rate differentials

Forwards on rates embed market expectations on where rates will go. Use differentials on those to determine current market pricing. Then as new information hits, you can adjust your priors.

However, rate differentials aren’t the only drivers. You also need to contend with near-term factors like the BoP mismatch, policy slope (where is fiscal and monpol driving the economy?), export/import competitiveness, etc. If you setup a dashboard you don’t need to fidget around with that data much, as long as you become good at (1) catching signals (filtering them from noisy information, such as large cross border m&a, central bank activity, etc.) and (2) reviewing your priors vs market expectations (embedded in forwards).

For any fx pair I trade, I track spot, futures strip, forwards, breakevens (or similar inflation expectations), spot rate, rate future strip, rate forwards on an absolute and relative basis. Ultimately I need to have a view, and trades occur when my view diverges from consensus & market price.
 
longandshort said:
You should read Adam Iqbals book (he was head of g10 fx at Goldman) instead.

Look up these concepts:
- international fishers effect
- carry trade
- interest rate differentials

Forwards on rates embed market expectations on where rates will go. Use differentials on those to determine current market pricing. Then as new information hits, you can adjust your priors.

However, rate differentials aren’t the only drivers. You also need to contend with near-term factors like the BoP mismatch, policy slope (where is fiscal and monpol driving the economy?), export/import competitiveness, etc. If you setup a dashboard you don’t need to fidget around with that data much, as long as you become good at (1) catching signals (filtering them from noisy information, such as large cross border m&a, central bank activity, etc.) and (2) reviewing your priors vs market expectations (embedded in forwards).

For any fx pair I trade, I track spot, futures strip, forwards, breakevens (or similar inflation expectations), spot rate, rate future strip, rate forwards on an absolute and relative basis. Ultimately I need to have a view, and trades occur when my view diverges from consensus & market price.
More...
nice thanks
 
You must log in or register to reply here.
Back
Top