fundamental analysis: headline news Flashcards
what are headline news?
Real-time forex news of the different fundamental events worldwide
how much of the fundamental analysis are the headline news?
70%
principal tool to create our fundamental idea
what us the best forex website for headline news?
ForexLive is the best website to read and research everything that is going on with the FX Market
why is ForexLive is the best website to read and research everything that is going on with the FX Market?
4 analysts that follow every news source and post on the site 24/7
each post is a fundamental headline
what are the most important parts of the ForexLive site?
The Must Read section for the most important news of the moment
Trading Session Wraps to keep yourself updated
What should you look for when you are reading, researching, analysis headline news?
goal is to accumulate important fundamental information and put it in your fundamental bag to grow your understanding/knowledge and later on form your fundamental idea
What are the main trading sessions?
Tokyo
London
New York
Tokyo trading session
Asians grinding
the currencies that move are JPY, AUD, NZD
London trading session
Europeans be grinding
Currencies who are moving: GBP, EUR, CHF
New York trading session
Americans be grinding
Currencies who are moving: USD, CAD, GOLD
why is the New York Session volatile and bipolar?
because all of the political/economical relationships with other countries
Trump
Financial institutions agendas (outside of trading)
what are the characteristics of the JPY
JPY is inversely correlated with CNY
JPY is a safe haven in asia.
When things are bad in asia, the JPY goes up
Why is the JYP is a safe haven?
because they have a strict monetary policy
They handle their economy very seriously and safely
It’s a worry-free investment for investors in asia
what are the characteristics of the AUD?
AUD does business mostly with China, it’s economy depends on it
AUD is directly correlated with China’s economy
AUD is a big producer of gold, when gold appreciates it affects AUD positively
AUD little brother is NZD
what are the characteristics of the NZD?
NZD is very dependant on AUD, it’s their principal business partner
Since AUD is dependant on China, NZD is indirectly dependant on China as well
NZD has an economy very dependant on dairy products that they export
what are the characteristics of the GBP?
Brexit, dependant on brexit news
Relationship with the EU.
After Brexit this currency will move based on that relationship Relationship inside the UK (Ireland, Scotland, England)
what are the characteristics of the EUR?
Relationship with the USA, Trump wants to put tariffs on Euro’s cars
Relationship with countries inside of the EU (Very Important)
One country can (positively or negatively) affect the EU as a whole
just a bit of Brexit
what are the characteristics of the CHF?
Safe haven of Europe
when EUR is not doing good, CHF will go up
what are the characteristics of the USD?
Equities market (Stocks, Indexes, etc)
International relationships (Trump vs China, North Korea, EU, etc)
Housing Market
USD is opposite of XAU (Gold)
Usually inversely correlated to AUD because of XAU and CNY
what are the characteristics of the CAD?
Very dependent on oil prices, canada is a big producer of oil
If Oil is up, CAD will be up
Relationship with USD, specific headlines regarding positive/negative issues between both countries can affect CAD
what are the characteristics of the XAU (GOLD)?
Safe haven for the whole world, but mainly invested from the US
what are the 3 principles that moves/affects the market?
- When a problem occurs/emerges, the currency will react negatively in proportion to the size of the problem. Same thing for the duration of the negativity.
- When a solution/good event occurs emerges, the currency will react positively in proportion to the size of the good news. Same thing for the duration of the positivity.
- If there isn’t any problem or any good news, the fundamental is flat, which means it’s less important and the market is going to move according to technical analysis
which type of news is more powerful? why?
negative news is always more powerful than positive news since humans are more sensitive to negativity
example 1 (Simulation):
US and North Korea tensions are building up for a few weeks now. North Korea continues to test their new weapon technology, but there has been no attack on the US or any other country.
How do you interpret this fundamental situation?
Positive or Negative? Size of the situation? Duration of the situation? Impact on market?
Tensions are heavily felt on the overall currency market, all eyes are on North Korea.
The situation is quite negative (8/10) because of the fears of escalation and the potential incoming war.
Negativity will last until this problem is solved definitely.
You have to monitor the headlines carefully. Your trading will be focused on this situation.
example 7 (Simulation):
Report: Multiple rockets fired at US Embassy in Baghdad. No injuries or damage reported.
How do you interpret this fundamental situation?
Positive or Negative? Size of the situation? Duration of the situation? Impact on market?
Big reaction in risk assets/currencies, however short lived.
Since there is no damage made, the market will correct itself pretty quickly.
The follow up will be to monitor the situation and see if we have an escalation or a fade away.
This will either make the market forget about the event or come back to their original reaction
Example 5 (Simulation):
The white house is considering tax incentives for more americans for buy stock.
How do you interpret this fundamental situation?
Positive or Negative? Size of the situation? Duration of the situation? Impact on market?
Even though the headline seems positive, it has absolutely no impact on any currency.
This is a speculation headline, does not affect the economy at the moment so there is no reason at all for it to have an impact in the forex market.
Example 4 (Simulation):
The market expected a FED interest rate CUT, however at 2:30PM, the result came out with being a interest rate HIKE against all odds.
How do you interpret this fundamental situation?
Positive or Negative? Size of the situation? Duration of the situation? Impact on market?
Very positive reaction, very explosive because of the surprising good news.
However very short lived, the market will move on very quickly since there is not much to follow up with (A few days at most)
Example 6 (Simulation):
A new virus spreads out in China at a very high pace. It is contained for the most part only in China at the moment and the virus looks more like a bad flu than a dangerous toxic pathogen.
How do you interpret this fundamental situation?
Positive or Negative? Size of the situation? Duration of the situation? Impact on market?
The market reacts very badly at the beginning because of the fear of the virus.
After a few weeks, the market understand that the situation is less dangerous than expected at first.
The effect of this headlines are almost gone on currencies.
However, eyes are still watching closely the development of this situation.
what is the most important part of our trading?
Creation of the Fundamental Idea
what is the Creation of the Fundamental Idea
Before even looking at the charts, you MUST know in which direction the market is heading
