Notes on Forex Fundamentals

[expiated]

I have a great deal of respect for those who can trade profitably based on fundamentals, though I don’t believe in it for myself personally. Nonetheless, due to the fact that I am now incorporating position trading analysis into my operational procedures (albeit I remain an ardent day trader) I would like to have some idea of when events are happening that might lead to a reversal in trend which could take a relatively long period of time to recognize.

For example, because I was viewing AUDJPY from a position trading standpoint, I knew seven days ago that I wanted to short the pair if and when it climbed above 74.67. But why has the pair been falling ever since the end of 2017 and the beginning of 2018 after climbing from September of 2016? Given that I have finished honing my day trading system, and even developed a position trading strategy—something I hand not planned on doing—I now have the time to begin exploring such questions and am therefore starting this thread to establish a convenient location where I can note fundamental observations as I gather them.

 

[gaussian]

I have a great deal of respect for those who can trade profitably based on fundamentals, though I don’t believe in it for myself personally. Nonetheless, due to the fact that I am now incorporating position trading analysis into my operational procedures (albeit I remain an ardent day trader) I would like to have some idea of when events are happening that might lead to a reversal in trend which could take a relatively long period of time to recognize.

For example, because I was viewing AUDJPY from a position trading standpoint, I knew seven days ago that I wanted to short the pair if and when it climbed above 74.67. But why has the pair been falling ever since the end of 2017 and the beginning of 2018 after climbing from September of 2016? Given that I have finished honing my day trading system, and even developed a position trading strategy—something I hand not planned on doing—I now have the time to begin exploring such questions and am therefore starting this thread to establish a convenient location where I can note fundamental observations as I gather them.

I don't mean this disrespectfully, but why do you talk in such flowery language? I think your ideas would come across with less noise if you wrote in a way that didn't sound like a math paper.

 

[Nobert]

I don't mean this disrespectfully, but why do you talk in such flowery language? I think your ideas would come across with less noise if you wrote in a way that didn't sound like a math paper.

I think that's a subjective question. Can't see anything wrong in his text. Actually, it was was a nice read.

In the end of the day, we are all different.

 

[expiated]

I will be considering the USDCAD first, but this is going to require that I start by trying to get a clearer understanding of the meanings of the terms dovish and hawkish...

A hawk is a policymaker or advisor who is predominantly concerned with interest rates as they relate to fiscal policy. A hawk generally favors relatively high interest rates in order to keep inflation in check. In other words, hawks are less concerned with economic growth, and more interested in seeing recessionary pressure brought to bear by high inflation rates.

Although the most common use of the term hawk is described above, it can be used in a variety of contexts. In each case, it refers to someone who is intently focused on a particular aspect of a larger pursuit or endeavor. A budget hawk, for example, is one that believes the federal budget is of the utmost importance.

A dove is an economic policy advisor who prefers monetary policies that involve low interest rates. Doves typically believe that lower rates will lead to a hike in employment. They worry about weak growth, high unemployment, and/or deflation due to a weak or contracting economy.

(These ideas came primarily from investopedia.)​

Supposedly the Canadian dollar is weak bullish based on market expectations for the Bank of Canada’s future monetary policy direction. However the USDCAD has been rising overall ever since August of 2017. Moreover, at 1.3062, I view the pair as located toward the lower end of its price range in a zone I calculate as stretching from 1.2913 to 1.3126. Accordingly, I will actually be on the lookout to enter a long position if and when the day-to-day trend turns north.

The BOC is reported to be the only major central bank that has not tilted dovish and has not adopted dovish forward guidance.

At 1.9%, the common and year over year consumer price index is currently looking stable just under the 2% inflation target.

When you add in retail sales and labor figures, the bias on net is weak bullish, as already stated. Nonetheless, the market is supposedly waiting to see if a trend develops, whether positive or negative, before settling on a clear path for the Bank of Canada.

And finally, given Canada's dependence on exports for economic growth, the global economic outlook, US/China trade developments, and Brexit developments are also influential (and are currently supportive) for the Canadian dollar (from what I understand).

 

[Overnight]

...

And finally, given Canada's dependence on exports for economic growth, the global economic outlook, US/China trade developments, and Brexit developments are also influential (and are currently supportive) for the Canadian dollar (from what I understand).

And from what I understand, in addendum, the Loonie is stongly correlated with the price of light-sweet crude. No idea why or how, but add that into your matrix.

 

[expiated]

Thursday / November 7, 2019 / 8:30 p.m. PST

Brad Gilbert of Traders4Traders pegs the Euro, Cable, Aussie, and Kiwi with a bearish central bank sentiment and, if I understand correctly, sees the Euro pairs as falling. Based on my charts, I would agree with that outlook as regards EURAUD and EURUSD.

Gilbert sees USDJPY as rising, but my gravitational trend line (I call it a directional bias line in the book I'm ghost writing) for the pair is still neutral, as it has been for the past 14 days, so if I buy the pair, I will do so very cautiously. Whoa! Brad just commented the the Dollar-Yen is difficult to gauge at the moment because it's all about geopolitical stuff right now, so he's not gung-ho about it either.

 

[expiated]

What's happening in Canada?

 

[expiated]

Wednesday / November 13, 2019 / 5:30 p.m. PST

I'm thankful to have been on the profitable side of the Australian employment numbers AND glad that market makers didn't stop me out before sending rates soring (or diving) in the direction I was set up to trade. It provided me with about the quickest per-trade shot in the arm I've managed thus far...

 

[expiated]

I expected the Kiwi and Aussie to be bearish in November, which they are so far, but I can't find where I wrote that down. This was based on my hourly charts with daily, weekly, and monthly trend lines and price ranges, but I now find myself even looking at monthly charts, which I could not have imagined myself doing a year ago. Here are my observations based on this longest time frame outlook...

• AUDJPY crossed below a down-sloping directional bias line at 75.26, so I now expect it to keep itself below that level.
• AUDUSD was unable to even make it that high (0.6944). Still, given that it has been falling since February of 2018, but both September and October saw the formation of green candlesticks, I do not expect the pair to climb above the directional bias line this month of next.
• At 82.08 CADJPY is above a mildly down-sloping directional bias line, so I expect to see the rate come down before the end of this year.
• I just bought EURAUD at 1.6084 and sold it for 1.6174 for 90-pips worth of profit in less than two hours, praise God. For the rest of this month, it will be in buy territory anywhere below 1.6091.
• At 119.80, EURJPY is in the same situation as AUDUSD, so I would not be surprised to see if drop even farther this month.
• I view EURUSD as being in the middle of this month's price range, so it has room to rise OR fall.
• Given the Brexit situation, I am not expecting the Cable pairs to act normal and therefore, will not attempt to forecast what they might do.
• I said the Kiwi pairs are bearish so far this month, but this is not true since NZDJPY is presently green. Though it and NZDUSD are both bearish since April of this year, there is plenty of room between their current levels and their down-sloping directional bias lines up above, so there is not a lot of pressure on them to go in either direction.
• USDCAD has been range bound all year long. So has USDCHF (for two-and-a-half years, in fact).
• USDJPY looks rather aimless as well.