Forex – Trade The Fundamentals First

The Bank Of Japan is set to release its Monetary Policy Statement here this evening.

It’s among the primary tools the BOJ uses to communicate with investors about monetary policy. It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.

It’s widely expected that the BOJ will announce further easing of monetary policy – the extent of which remains to be seen.

Looking further out  – I see that a fundamental shift in value of the USD/JPY has finally completed its long-term bottoming process and is now decidedly reversed. As both countries now battle in the “race to the bottom” it makes for some interesting debate when one considers “which will go down more”? when  both countries throw everything they’ve got at currency devaluation.

Who’s got the larger printing press?

This is the kind of thing that currency traders must consider when looking out at longer time frames and potential trends. Monetary policy drives currency markets, and sudden changes or surprises (like an interest rate hike for example) can blow a newbies account overnight. I cannot stress enough – the need to be well-informed on fundamental issues surrounding a given currency or pair – in order to effectively trade it. The technicals and charts always come second for me, after I’ve got a firm understanding of the current and “forward moving” fundamentals.

Short term I have sold all of JPY trades as of last night as well most everything else for a 6% return since Sunday night’s  risk on release. Looking at the shorter term charts – I see the Yen /JPY has fallen fast to a well-known area of support and would likely expect a bounce on the release tonight as opposed to further selling.

As well the USD looks to have run its course as expected in falling hard over the past days. I expect a bounce/retracement there as well.

4 Responses

  1. schmederling December 20, 2012 / 12:34 am

    Thanks Kong in responce to the other post – yeah weird…. & as you say weird is sometimes the norm for a little while… seems to be a little panic everywhere in PM’s… It is what it is…. I am spread out from Jan to March so a little pain but will live… LOL.
    JPY moving down on more printing…. will be interesting…. Cheers..

    • Pot Stock Watch December 20, 2012 / 7:04 am

      Yes Schmed things are a little muddled there in the PM space – and as we’ve touched on before “they aren’t gonna make it easy”. I think the promise of QE forever has dulled the senses to a certain extent, and perhaps a lot of traders have been caught flat footed here – expecting this all to happen overnight. Looking at it now (in the rear view mirror) it did set up pretty well for a bit of a hose job by the big boys.

      March is a pretty long time away now, as I too am still holding a couple options so…….lets let it run its course. I think it is 100% embarassing how the U.S is dragging this silly fiscal cliff thing on and on…..and am sure I speak for alot of people when I say that I look forward to never seeing John “Boners” face on the tube again.

  2. Pot Stock Watch January 12, 2013 / 10:56 am

    Reblogged this on Forex Trading with Kong and commented:

    A subtle reminder for those of you who have been with me for a while – and an important post for newcomers. In considering the fundamentals “first” – please take note of the date of the original post. Nearly a full month of downward action in the Yen, and well into the trade. 600 pips in USD/JPY alone – and equally large moves in AUD/JPY.

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