As a predominantly technical trader I do not usually place a lot of emphasis on the fundamental data that exerts pressure on the FOREX markets. But at times, and we are in such times right now, a technical trader needs to be keenly aware of the influence of the pressure on the markets exerted by fundamentals.
I am not going to describe fundamental data as relates to FOREX – let’s just leave it at “everything that affects the price of a currency EXCEPT technical data.
I will only say that in my opinion fundamental data is like gravity – a very weak force at most times – but an insistent and persistent force that eventually moves markets in the direction of its pull.
Let’s take the Japanese yen for example. Some analysts have described the yen as a bug in search of a windshield – primarily based on its fundamentals – massive and increasing debt and an undesirable demographic outlook with respect to population.
On the positive side of the yen fundamental ledger is the belief amongst many FOREX traders that the yen is a safe haven currency.
So we have a world situation in which traders seeking safe haven have bought the yen to a degree that it is likely grossly overbought against the US dollar. Even though it has recovered modestly, I think that the yen is still overbought significantly. The pressure of the fundamentals is going to be huge for a period of time – probably until the yen is back above 120 to the dollar – and that is a long way from its current position.
Yours truly has already made several profitable long USDJPY trades – and I am constantly on the alert to get long that market again.
The overwhelming victory of Abe in the recent Japanese elections virtually assures that Japan will continue monetary stimulus (that is central banker lingo for debasing the currency).
I think that 120 for the USDJPY pair is definitely in play for the near future – and 150 by the end of the year is not out of the question.
Even a safe haven currency can only take so much abuse before the market starts to notice the bruises and make adjustments.
If you haven’t tried my RMI, now might be a good time – I wouldn’t think of trading any market without it.
If you want to know more about the RMI, take a free trial of it at the TradeStation App Store: https://tradestation.tradingappstore.com/search/all/rating?search=RMI.
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