Many people think fundamental analysis doesn’t work, and the main reason for this is because they simply don’t understand it correctly.
Over the last 2 weeks we’ve had a couple of news announcements that have confused people into thinking that news trading is pretty random, and almost impossible to make consistent profits from.
I will look at this event in more detail and explain why things moved the way they did.
The particular event was Australian private capital expenditure, and this figure came out at -4.2% which was much worse than the expected 1.6%. Many retail traders who look at that particular figure would think that the AUD would fall off much worse than expected data. However surprisingly, the AUDUSD rallied almost 100 pips, which continued into the following day where it broke 0.9300.
Many people would see this and instantly think that news trading doesn’t work, and it’s completely random.
Basically, this is not the case, and anyone who thinks that simply doesn’t understand how news trading works. Which is the reason I’m trying to explain it, and give you a better understanding of why things move the way they do.
You’ve got to look behind the headline figure, and in this case with the Australian private capital expenditure, overall companies were investing less which is of course negative, however there was two things you need to bear in mind from this figure.
Firstly, the projections for the coming year were much revised up, which provides a very positive outlook.
Secondly, it was shown that companies and businesses away from the mining sector (which is one of Australia’s biggest industries) were expanding at a faster pace, and the reason that’s important is because the RBA is focused on getting Australia away from relying heavily on mining and exporting commodities, particularly to China.
So in summary, they are trying to move away from depending on mining so heavily, and from that figure, it showed that the transition from mining to non-mining is going very smoothly, which overall is bullish for the AUD.
At no time should anyone view the information presented anywhere on this website as advice, recommendation or proven. Everything reflected is merely opinion and may not be accurate. The purpose of the site is to express the opinions and views of Jarratt Davis. There is no intention to offer specific help, advice or suggestions to anyone reading any of the content posted here.
Editors’ Picks
EUR/USD comes under pressure near 1.0630
Further gains in the Greenback encourage sellers to maintain their control over the risk complex, forcing EUR/USD to retreat further and revisit the 1.0630 region as the US session draws to a close.
GBP/USD stays firm amid BoE, Fed commentary and US data
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
USD/JPY rebounds from 154.00 as investors digest fears of Japan’s intervention
USD/JPY finds buying interest near 154.00 as investors see Japan’s intervention mere a temporary solution to support weak Japanese Yen. Japan’s National CPI data will impact market expectations for BoJ’s rate hikes. The US Dollar corrects despite the Fed is expected to keep interest rates higher for a longer period.
Editors’ Picks
EUR/USD comes under pressure near 1.0630
Further gains in the Greenback encourage sellers to maintain their control over the risk complex, forcing EUR/USD to retreat further and revisit the 1.0630 region as the US session draws to a close.
GBP/USD stays firm amid BoE, Fed commentary and US data
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Ripple faces significant correction as former SEC litigator says lawsuit could make it to Supreme Court
Ripple (XRP) price hovers below the key $0.50 level on Thursday after failing at another attempt to break and close above the resistance for the fourth day in a row.
Have we seen the extent of the Fed rate repricing?
Markets have been mostly consolidating recent moves into Thursday. We’ve seen some profit taking on Dollar longs and renewed demand for US equities into the dip. Whether or not this holds up is a completely different story.
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