Applying macro fundamentals
Turning an economic view into a choice of currency pair and a trade idea.
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Lessons
- 01Building a fundamental view of a currency.A fundamental view is a written judgement of whether an economy's data favour its currency. A simple method scores three pillars, growth, inflation and central bank policy, from -2 to +2 each, based on direction and surprises. Comparing two totals shows which currency the data lean toward, though prices often move for other reasons.
- 02Pairing a strong currency with a weak one.A currency pair moves on the gap between its two currencies, so a correct view on one currency can still give a flat trade. Pairing a currency you expect to strengthen with one you expect to weaken lets both forces push the price the same way, though each half of that view is a forecast that can fail.
- 03Combining fundamentals with technical analysis.Combining the two means using fundamental analysis to decide which direction you favour for a currency pair, then using the chart to choose when to enter, where to place the stop and where to take profit. You act only on chart signals that agree with that direction, which cuts trades but does not guarantee better results.