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
AUD/USD risks a deeper drop in the short term
AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
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.
Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving
Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.
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