Wednesday, September 19, 2007

Day 1: Fundamental Analysis

My plan is to stick with EUR/USD and try to get something from there. I currently have a system which I will reveal when I have the time to do so. So let's start with fundamental analysis for Europe and US.

First of all, the biggest news yesterday was the 50 points Fed cut which spurs equities to rally upwards. Sad to say it is bad news for the USD as it EUR/USD (from hereon called "euro") soars. Markets are currently in consolidation on uncertainty after the rush yesterday. As can be seen here on the USD/JPY (from hereon called "gopher").
Look at the latest movements. The sudden spike was due to yesterday's rate cute of 50 points and then it cools off with a little of correction before moving sidewards with no clear direction of where to go. I am of course not trading on gopher but looking at how both stochastics and RSI linger around the midpoint is a clear sign of market consolidation.

I suspect all we need is a good news for the price to suddenly go up or down. I suspect that global equities rising leads to weakening of the yen but we'll see the full extent with a bit more time to come.

Back to the euro, now that we know people are uncertain about how the USD is relative to the JPY, we could say people are uncertain about whether the USD is overpriced or underpriced. It all depends on the euro. Let's look for signals, from fundamentals (i.e. news articles).

Here are some which I think might be relevant.
  1. Belgium break-up fears.
    With no new government for 101 days after their general election(good grief), concerns are growing that the country will finally split up. Uncertainty is not good for euro right now, as it casts doubts of a "united europe". No doubt about this.
  2. Greenspan casts doubt on publication of inflation goals
    "They will have to go through a tricky process of explaining if inflation deviates from target" Quite true, but I don't see how this affects the euro.
  3. US housing market outlook worsens
    Tricky this one, since the crash is not yet evident. It's going to be bad for the US economy as builder sentiment fell for the 7th consecutive month. Bad, but still waiting for the crash to actually happen.
  4. Clouds gather in Germany as sentiment sinks
    New data added to evidence that the best of Germany's economic revival was over, although economists did not expect a sharp decline in performance. Bad for euro, since they are still uncertain whether Germany's recover was TRULY over.
  5. Dollar plunges to new low versus euro
    Reasons: fed cut on interest and discount rates, UK inflation fell below BoE's target in august, Northern Rock crisis to have lasting effects on consumer confidence.
I think those are the relevant news. Nothing really significant but it shows a probably weakening euro in the long run and an unpredictable USD.


Hor ny Ang Moh said...

Hallo! Wah so complicated wan! Affect bolehland economy or not? Have a nice day!

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