 Hi, my name's Leon Rope, currency trader and trading coach at Trading180.com and in this video I'm going to show you a really easy way to understand sometimes complex forex news headlines. So you can stay in trends for hundreds and you know, on a rare occasion, actually thousands of pips and you know, because I know a lot of traders do tend to take profit too early and not really understand what's going on in the market. Now if you're one of those traders who believes that price action is king and fundamentals and the sentiment analysis is nonsense then this video is just not for you. This is videos for those traders who know and understand and believe that really trends and market states like trends and ranges occur due to over the medium to long term that is due to fundamentals and value, right? So the market is buying low and selling high. In the short term the market is really driven by liquidity hunting, market making, etc. in positioning by institutions but over the medium to long term value in terms of you know whether the market was expensive or cheap will show itself in the form of you know, trends or arranging market and so before we get into it there's a few things you must understand. You have to must understand the basics of of macroeconomics and cycles and so everything moves in a cycle, right? Everything moves in a cycle and one of the things that we look towards in the forex world is interest rates, right? Interest rates. Now interest rates is a major factor in forex value, right? So central banks either you know, high crates, yeah? And when you know, central banks are on a rate hiking cycle, yeah? It's because they're trying to appreciate their currency, yeah? And when central banks are on a rate cut and the rate cutting side of their cycle, they're trying to devalue the currency. Now interest rates are driven mainly by two factors which are inflation, right? So inflation. They try to control inflation and central banks have a two percent inflation target, right? Two percent target and also they have the economy to worry about as well. So GDP. GDP, yeah? And you have an inflation cycle which actually is synchronized to the interest rate cycle, yeah? And the GDP cycle as well which is synchronized to the inflation and the interest rate cycle. Now again, interest rates are really driven by what inflation and GDP are doing, right? And so central banks look at inflation and GDP and then they decide whether to hike, hold or cut rates, right? And so in order to really kind of understand some news articles and news headlines, let's say for example you get a news headline. I'm going to show you an example of this matter of fact a bit later where it talks about for example, I don't know, GDP, yeah? Now if we know that interest rate hikes appreciate a currency, yeah? And that's supposed to be a plus and interest rate cuts typically devalue a currency. If we understand that GDP or there's a positive new sentiment about GDP and GDP has a cycle in terms of, you know, you've got the expansion phase, yeah? You've got the boom phase, you've got the contraction phase, you've got the recession phase, you've got the bust phase or slump phase. This is also known as the business cycle and then you've got the recovery phase here and then you've got the expansion and then you're back to boom again, right? And a cycle repeats. Now if you have, if you read some headlines where you're seeing that the headline is very positive and it's talking about the economy is growing, yeah? Then that actually is positive for the economy because if the GDP and inflation cycle are synced with the interest rate cycle meaning that inflation typically rises when interest rates are going higher and GDP also grows when you also have inflation rising and in a rate hiking cycle then you know that interest rates should at least be on the rise all being held, right? Now it does depend and this is what typically historically happens on the macro level. This is not something that happens, you know, one day up, one day down. You have to look at this over three, six to nine month period, yeah? And so if there's a headline talking about GDP growing, yeah? Then what you'll also notice is that inflation should start to pick up which should also mean that the central bank is either in their hiking cycle or thinking about their hiking cycle. And it's the same thing when we're talking about the contraction as well end of the economy, right? Let's say contraction and the economy is heading into a recession. What typically happens in that phase of the economic cycle is that you have disinflation or deflation starts to happen and then you start to get rate cuts. Central bank is on their cutting cycle, yeah? And so it's then, you know, easier to then decide what to do over the medium to long term and have a good medium to long term direction when looking at buying or selling currencies depending on what you read in the headline. So if we know, for example, there's a headline that's saying that inflation is coming down, you know, dramatically, then you should know what end of the GDP cycle you're probably heading into if you're not already in there, which then leads to the central bank should be on the way to either cutting rates or starting to cut rates or thinking about cutting rates which then you can start to position yourself again ahead of time because this is all about buying the rumor selling the fact, of course, the data has to support the narrative but if you start to read these headlines, you know what you need to do over the medium to long term, right? And so these things start to come predictable. And again, if you start to see headlines where the central bank is looking to raise interest rates, you'll know that inflation is likely on the rise and above their 2% target and GDP is maybe looking at the recovery expansion into the boom phase of the economic cycle. And also as well, and this is known as intermarket analysis. And intermarket analysis is really the study of different, I guess, asset classes and how they and how they relate. And so you also have, you know, treasury bonds, right? So you have the bond market, right? So bonds, I put treasury bonds and I put treasury bond yields, right? Because you have prices and you have yields. Now prices, treasury bond prices work inversely to treasury bond yields. Now yields are basically also synchronized to this cycle. So whenever you see an article about yields coming down and again, I must stress, this is not a day-to-day thing. It doesn't mean that one day yields are going up and then everything else is going up and one day yields are going down. Everything else is going down, right? These cycles can take, you know, years to play out. So for example, you could have an interest rate hiking cycle. The last interest rate hiking cycle has probably lasted about a year or so. And you'll have, sometimes it can last maybe a year and a half, maybe two years. A cutting cycle or a holding part of the cycle can last for maybe, you know, months and years, right? And have been known to last for years. And then sometimes the rate cutting cycle can last for again months and years. And so this is not something that this week, this is what's going to happen and next week is, you know, something else is going to happen. And even if you have inflation go up, you can still have GDP go, you know, GDP reading go down. But if we're looking at the macro side of things, we're zooming out and looking at the overall move of these cycles, they historically will be in sync overall, yeah? And so going back to Treasury bonds. So if you read an article in a headline that talks about Treasury bonds rising, yeah? And, you know, traders are piling into Treasury bonds and just thinking to yourself, what Treasury bonds got to do with forex? It has a lot to do with forex. But what you should know is that Treasury bonds, or sorry, Treasury yields. Treasury bond yields, not the price, Treasury bond yields, yeah? If they rise, it typically means that the central bank is looking to high crates, which means inflation is, you know, rising, which also means that GDP should be on the recovery expansion, possibly boom phase of the economic cycle. And in the same way that you have Treasury yields, Treasury bond yields, if you start to read headlines where they're coming down, they're not just down for the day or just down for the week, but you start to read headlines where it's like, okay, we're seeing worries that they should come lower over the medium to long term, then you should know where you are. And you see multiple headlines, right? Maybe you might read a headline today and it's talking about bond yields. And you've been reading headlines over, you know, the past maybe week or two, and you're starting to say, okay, you start to piece it together. And then you start to say, all right, then well, that's what this means for, you know, the currency, right? And so again, really, the basics of forex is understanding which currency, yeah, is where on its rate cycle, yeah? And so if you have, for example, a currency and you're reading about the euro and they're talking about the euro going into a recession, for example, then you know that the central bank is likely cutting rates. And let's say, for example, the United States, they're not talking about going into a recession. Let's say, for example, they're on the growth end, they're on the recovery end, or they're on the, you know, the boom end of the cycle, then you would know that the central bank is looking to hike rates, which means it's positive, yeah? Or it appreciates the currency, yeah? And so that's where you get a divergence in monetary policy by understanding headlines that talk about interest rates, or inflation, or GDP, or bond, treasury bond yields. And you can even add commodities, yeah, to this too, right? Because you have commodity cycles, again, historically, typically, are in alignment with economic growth because, and commodities such as, for example, oil, yeah? Because the demand for oil in an economy that is expanding and booming, right, and recovering, commodity prices typically go higher because there's higher demand, you know, there are investment in infrastructure projects, transportation. And so when you start to see the economy growing and big economies growing like China, yeah? Then you typically do have commodities like oil, industrial metals, you know, copper, aluminium, etc, start to go higher, right, in price as well. So the commodity cycle is also linked, right, to what we know about interest rates, inflation, GDP, treasury bond yields, and the like. And so let's get into some examples, matter of fact, of this. And so you can see and have a, you know, really kind of quick understanding just from reading the headline, and also as well, maybe a paragraph or two, and, you know, not fear that reading fundamentals and understanding the fundamentals is so complex, because I think a lot of traders, they get put off by fundamentals because of their own self-belief about their understanding, and they feel that it can be too complex. And you can go down the rabbit hole, right, of fundamentals, fundamentals, and the sentiment can be a minefield as, you know, maybe some conflicting news, etc. But from a basic understanding of what is happening and what is likely to happen over a cycle, over the macro side of things, over the next, you know, three, six to nine months, you can see what is likely to happen by just reading certain articles. And the more of these articles that start to come out in the publications that you read, you can then get a feel for what is likely to happen, and stay in those larger trends that are likely to occur. Now, trends don't happen all the time. There are, you know, markets that do range, always known as an auction, right, and you can also understand when a market is likely to auction or how the market is likely to go higher or lower. But let's get into some articles about and read some headlines and see how this, how you can basically apply what I'm saying here to the news. So here we have an article which says, the yen falls as earthquake raises bar for Bank of Japan to end negative rates. And so if you have an understanding of the grasp on obviously cycles and why inflation and GDP affects what a central bank is likely to do with interest rates, just by reading this headline, I know that the, the effect of the earthquake is not good, I guess, in the short term for the, for the yen, right. So it says here yen to see fresh selling pressure as January move now unlikely. So again, let's just go over why. So remember we have, first of all, interest rate cycle, then we have inflation cycle, and then we have the GDP cycle, right. And so if we know that interest rates are just turn that to an I interest rates inflation and GDP. Now, for context, the Bank of Japan is looking to hike rates. Yeah. So they're looking to hike rates on this end of the cycle. Right. Now, if GDP, yeah, is seen as in this earthquake has caused massive destruction in the country, and is going to slow, you know, productivity down as the country rebuilds on the earthquake, yeah, in the short term, then interest rates are unlikely, right, to rise, right. So the end of negative rates mean in that the Bank of Japan currently is in has minus 0.1% interest rates. And what they're looking to do is go to 0% interest rates. So that's basically hiking interest rates. But if the economy is on this end, yeah, or there's a setback with the economy, then the central bank are unlikely to hike rates because you need a growing economy, rising inflation above their 2% target to trigger interest rates to go on this side, right. So just by understanding the basics, yeah, and I get it, you can actually just read the, you know, the subtext, right, the subheadings, which is Gen2Z fresh selling pressure, as January moved now unlikely. Even, it says, even policy change in first half seems hard, Mizuho's camera. And again, if we kind of scroll down and read the article, yeah, it says here, the yen is coming under renewed pressure as a powerful earthquake that hit Japan on New Year's Day makes it harder for the Bank of Japan to abolish negative interest rates this month. And so it says Morgan Stanley, MUFG changed his call for the Bank of Japan rate decision this month, now sees it leaving current policy in place partly as the central bank has to assess the adverse impact from the no-toe peninsula disaster on the economy, right, everything that we've been saying about, you know, the cycles, while speculation about a January tweak is receding, many still expect it to end negative rates, so hike interest rates in April or later in 2024, right. And so that's just an example of, you know, I didn't even have to read, really read this, but just to kind of spell out that you can read the headlines and understand what is likely to happen, yeah, in terms of where you are in the interest rate cycle, and therefore what is likely to happen to the currency, and it says here, obviously, that the yen is coming under renewed pressure, yeah, because if you think about it, the, it was by the rumor, so the fact situation where the market was expecting the Bank of Japan to hike rates a lot sooner, the earthquake has put an end to that, so now the yen has to be revalued, and so that's, you know, how we can say, or we can see that, let's say for example you was in a, you was in a trade and you was looking to buy the yen, or you were already in the yen, and, you know, the yen has been strengthening on anticipation of rate hikes, and then this is now put an end to those rate hikes for now, then you can actually look to get out of and, you know, take profit on that yen trade simply because you know that the rate hikes are not coming as soon as the market is pricing in, so that's where you actually can get out of a trade, right, and take profit rather than sometimes holding on and seeing your profits evaporate, so the next article is, it says here that China's 10-year yield hits lowest since 2020 as easing bets mount, and so, right, let's do this again, so remember we were talking about cycles, yeah, of course you remember, so cycles, but if you remember treasury bond yields also are in sync with interest rates, what, interest rates, inflation, i-n-f, oh, sorry, F, GDP, and treasury bond yields, yeah, so the headline is that the 10-year yield, yeah, hits its lowest since 2020 as easing bets mount, right, so again we talk about the cycle, where are we on the cycle, so it's talking about easing, right, is in cutting rates, yeah, so this is interest rates, and you're seeing that the 10-year yield is hitting its lowest in 10 years, so again it's been trending lower, right, and so what should happen in that environment to inflation and also the economy, that should also be, you know, happening to those as well, right, so let's read the article, it says here that China's bond market rally continued into 2024, remember I said, and it says bond market rally, right, so remember treasury bond yields and prices actually move in opposite directions, so whenever you have yields going up, bond yield prices go down, and when you have prices go up, bond yields go down, right, so when it talks about China's bond market rally has continued into 2024 as bets on the potential for interest rate cuts gathered pace, yeah, so the rally in interest rate bond prices as interest rate cuts gather pace, look at that, right, so you can see when you have, when you're in different phases, yeah, when you're in the up phase, up phase, right, up phase of the cycle, up phase of the cycle, prices, bond yield prices should be on the down phase, and when you're on the down phase, right, of the cycle, then bond prices should rally, so just from this headline alone, again this confirms what we're talking about, right, bond prices are rallying, which is confirming the potential for interest rate cuts, yeah, following weak economic data, weak economic data last year, weak economic data, the contraction side, yeah, the 10-year yield and sovereign notes dropped to 2.54 on Thursday, lowest since April 2020, extending the decline that kicked off in November, a combination of liquidity, support from the People's Bank of China and major lenders, slashing deposit rates for a third time in 2023, fueled expectations that Beijing will loosen monetary policy to further aid growth, right, again, loosen monetary policy, loosen is another word for cutting rates to aid further growth, right, because what you need is to cut rates in order to boost economic growth, and it says here again, rate cut expectations are in play, and also markets overall remain bearish on China's growth outlook, said Albert Leung, a strategist at Nomura International in Hong Kong, yields may have more room to fall if those rate cut expectations hold firm in the absence of any forceful fiscal or property stimulus ahead, right, and also as well in China, you can look this up, you have disinflation or deflation actually happening now at the same time as all this is going on, so you've got bond prices going higher, yields are coming down, right, so yields are weak, right, sovereign yields, the 10-year, the yield on the 10-year, right, dropped to 2.54, right, so it's confirming this end of the cycle, right, and so that really, if you understand this from a macro perspective, then you can make better decisions over the medium to long term, again, if you are a short-term trader, if you're a day trader and just trying to scalp and get, you know, 10, 20 pips here and there, this is likely not for you, but if you are a, I guess what you would call a swing trader, a fundamental trader, a risk analysis or risk sentiment trader like myself, and you are looking to trade, you know, and get hundreds of pips, and you don't necessarily have to hold for hundreds of pips, not at all, but you can, you know, get in on 100 pips, a couple 100 pips, get out, wait for a pull back, then get back in because you understand that the trend, right, the trend should want to continue, you know, moving higher, right, and higher, and if it pulls back again, we understand that this is the overall direction of the trend, and it should be the overall direction of the trend, as long as the data supports that narrative as well, so you have to have the data to back this up, so even if one of the, you know, I would say this before I go and this video is, you know, one of the things that you really want to look out for is, for example, an uptrend, let's say, is data supporting your buy trade, but prices are going to the downside, for example, yeah, because what that allows you to do is buy for cheaper, that's what you're ultimately looking to do, so when you see data that comes out and it's not great for your, I mean, it's great for your trade, but prices are doing something different, normally in the short term that's just liquidity hunting going on, stopping traders out, and then it's likely to continue on its way over, you know, the quarter, six months, potentially the year, but going back to macroeconomic cycles and understanding where you are is really, really important, it's the reason why you have, for example, you know, the stock market rallying, the stock market cycles, right, that also go into this and stock market cycles are linked to what typically central banks are doing with interest rates, so if you've seen the stock market rally recently, it's because of the expectation, in fact, of rate cuts and the rate cuts when the central banks are on their rate cutting cycle that allows, you know, investors, sophisticated investors and institutions to actually borrow for cheaper at a cheaper rate so that they can put their money into a riskier asset like the stock market and get maybe a better return than what they're borrowing their money from, so a lot of people have misconceptions about, you know, the stock market weakening in a recession, know that that doesn't happen if you go back to, for example, the, you know, with COVID when we were in lockdowns and the stock market, you know, dropped for a bit, but then it, you know, made this massive historic rally and, you know, it was mainly because the people that knew and that were borrowing money for absolutely cheap were able to basically put their money into, you know, value stocks, etc. and make a killing, so, yeah, understanding not only cycles, but also intermarket analysis where you are on each phase of the cycle and what is likely to happen to inflation, GDP, you know, bond yields, bond prices, commodity prices, and even stocks, it's all interlinked and so if you know that, it can put you, you know, two, three, four steps ahead of the average trader in a major life a whole lot easier in trying to figure out, you know, which direction to trade. Anyways, guys, I hope that helps, take care, and if you have any questions, post them and I will try and get back to you when I can.