Building on my first Article this month, there is pressure born from fundamentals. This pressure can be a light breeze or a devastating tornado, ripping through price barriers and expectations. As a pure technical trader, I like to anticipate fundamentals through technical data, rather than to analyze the fundamental data for clues. Here is my standing…
First Consideration :
Firstly, from my little experience, I have found that the fundamental data does not alter the actual technical trend. For example, if the price has bounced off a 4 Hour Bottom Bollinger some time prior to data, with the price not yielding, it is unlikely that the fundamental data will alter the fresh, long bias until it has reached a suitable resistance level. Depending on the data, the price might short to a nearby boundary but will find support easily and then continue long. If one is trading the news, then, as risk management, it is a suggestion to identify a reasonable boundary in strength counter-direction to the trend and to effect a stop-loss with some margin clear of it.
I was unable to post charts, however on 01/07/2014, on EUR/USD, we had USD economic news (ISM Manufacturing PMI) at 14h00 GMT, coming in slightly weaker than forecast. The price did try to long, however it was closely blocked by the 1 Hour Bollinger Top Line and further, pressure from the Daily Bollinger Top Line from which it had just bounced. It resumed downward pressure quickly and continued with the trend.
Second Consideration :
Secondly, when anticipating fundamental data, I like to look at the short-term oversold / overbought status. Unless the expected fundamental data is of magnitude such as FOMC, I find that the effect of the fundamental data released follows short-term pressure and I also find that short-term pressure is quite often to quite regularly at an extreme overbought / oversold level just prior to the release. So, if one is sure of the short-term pressure, then one can almost safely anticipate the direction in which the price will move, on release. This is a neat trick to anticipating news. I traditionally use a 30 Minute Stochastic for this effort. I also consult the 1 Hour stochastic.
Again, I was unable to post charts today but it is fairly consistent and a pleasure to watch.
In my opinion, I am not experienced enough to be a fundamental trader. I truly don’t have the years with Forex to be able to be profitable based on economic releases and governmental pressure. The simple solution, in my opinion, is to allow the technicals to anticipate the direction and, in most cases, it is a winning solution.
Furthermore, and like the beautiful Tulips below, the basis of Forex, to me, is the technicals with a light smattering of pressure from the fundamental data. But if one concentrates on the technical data, then the fundamental data just becomes welcomed and cheerful volatility for one’s effort.