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 under pressure as yield climb weighs and Fed risk dominates
EUR/USD slides 0.05% as the week begins, courtesy of broad US Dollar strength, amid choppy trading as traders brace for the Federal Reserve monetary policy decision. At the time of writing, the pair trades at 1.1637 after hitting a daily high of 1.1672.
GBP/USD shuffles its feet as investors await key central bank moves
GBP/USD found little momentum on either side of the line on Monday, with the Cable pair churning chart paper just north of the 1.3300 handle to kick off a fresh trading week. Broad-market sentiment is largely hinging on an upcoming interest rate decision from the Federal Reserve due during the midweek, and investors are shunning stepping too far into either the bullish or bearish side in the runup to one of the biggest rate calls of the year.
USD/JPY remains capped by 156.00 amid renewed USD selling
USD/JPY is consolidating its uptick to near 156.00 in the Asian session on Tuesday. The US Dollar faces renewed selling pressure amid a cautious mood and dovish Fed expectations. Meanwhile, traders assess the potential impact of a strong earthquake in Japan. The immediate focus now is on BoJ Governor Ueda's speech.
Editors’ Picks
AUD/USD keeps range above 0.6600 ahead of RBA rate decision
AUD/USD holds its range above 0.6600 in the Asian session on Tuesday, stalling the overnight pullback from its highest level since September 18. The divergent RBA-Fed policy expectations act as a tailwind for the Aussie. The uptick, however, lacks bullish conviction as traders turn cautious ahead of the RBA rate decision.
USD/JPY remains capped by 156.00 amid renewed USD selling
USD/JPY is consolidating its uptick to near 156.00 in the Asian session on Tuesday. The US Dollar faces renewed selling pressure amid a cautious mood and dovish Fed expectations. Meanwhile, traders assess the potential impact of a strong earthquake in Japan. The immediate focus now is on BoJ Governor Ueda's speech.
Gold battles $4,200 amid risks over a hawkish Fed rate cut
Gold price trades cautiously around $4,200 in the Asian session on Tuesday. The precious metal traders remain wary amid concerns that the US Federal Reserve could adopt a hawkish tone in its rhetoric, despite delivering a rate cut on Wednesday.
Dogecoin, Shiba Inu test key resistance levels ahead of FOMC meeting
Memecoins Dogecoin and Shiba Inu are testing key resistance levels ahead of the Federal Open Market Committee interest rate decision on Wednesday. With market participants expecting a 25-basis-point rate cut, both memecoins could face pressure near key levels.
Big week ahead: Fed poised to cut as Canada, Australia and Switzerland hold steady
This week we get a lot of data releases but the biggie is all those central bank decisions. Canada, Australia and Switzerland are expected to stay on hold, but the Fed is expected to cut.
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