 at some point, right? So I need to kind of know possibly where you are in order to maybe explain things a bit further or to kind of maybe clarify certain things. So when you said that, like, do you know what interest rates inflation is and how they kind of interlink? Are you okay with that? I think that's where I'm struggling because these terms are actually new to me, right? But I see that you always talk about GDP, inflation, interest rates, right? Yeah, so in comparing them with other currencies, if other, if let's say GDP is like the example I saw on YouTube was US was 2.5% on interest rate or GDP, I'm not even sure, because they're all just percentage and Euro was 0% and you said it should be a buy or for Euro-USD, I think. Oh, I think that's interest rates, yeah. Yeah, so what we could do is we'll deal with, I guess we'll be able to do one thing at a time. So what we'll do is we'll deal with, for example, what is inflation, I guess, right? So one second, let me share my screen with you. Let me know when you can see my screen. Yeah, I see it. No worries. So we've got inflation, all right? And I guess what I'll do as well, I will, and I was thinking about this the other day, is basically writing out like I'm almost like a glossary or some terminology of what this means, I guess, because then it might put things in perspective when looking at, for example, the, when looking at this, because this is really the, this diagram basically explains everything, but I guess if you're not too sure, I guess what inflation is then, or deflation then it still might be a bit difficult, but what we'll do is we'll kind of break it down where you've got inflation is basically prices, right? And the inflation part is the higher the price, oh, sorry, the higher the inflation, yeah, the more devalued the currency is or the more depreciating it is, right? ED, right, that's TED, sorry, the more depreciated, yeah? So if you've got inflation at, you know, let's say for example, 1%, yeah? Or 3%, which currency is depreciated the most? The one that has 3%? Exactly, that's exactly it. And as you go along the scale, yeah? 5% is depreciated more than 3%, et cetera, that's exactly it, yeah? So think about, you know, what a devalued or a depreciated currency is, it's basically just a weak currency. So maybe, and I think where a lot of traders get confused or try to maybe get their head around is the fact that because the word inflation, you would think that it's actually an increase in value, but it's actually the opposite, yeah? So deflation. So let me get this, inflation means the currency is not doing well, right? Well, there's a central bank target of 2%. This is where, you know, inflation is acceptable, yeah? So every year, the central bank has a target, you'll see here, so the central bank has a target of 2%, every central bank around the world, that's their inflation goal. So just by default, currencies are supposed to depreciate by 2% every year, that's the aim anyway. Yeah, they're supposed to be 2% inflation, meaning that if the central banks had their way, your money would buy 2% less every single year. Yeah, it sounds strange, isn't it? Like, why? You know what I mean? Like, why is that? I'm thinking here in South Africa, we used to buy bread, I think, two grand 50, and today it's 14 grand 50. Yeah, that's exactly. Exactly, and that's basically devaluing the currency, right? Because it costs more of that currency to buy bread, right? Exactly, to buy any item. That's exactly what, inflation now, now inflation and deflation of the value of the currency, yeah, is very difficult to control, extremely difficult to control, and they can only do that by hiking, holding or cutting interest rates, right? Before we get to interest rates, right? E-R-E-S-T rates, before we get to rates, oops, I'm on a trackpad, so it's a bit difficult to talk about, I mean to write sometimes. So let's deal with deflation before we get into, yeah, so inflation, yeah, the goal, right, is 2%. Yeah, but inflation just means that your currency is being, it's an acceptable depreciation, so 2% is acceptable depreciation, or acceptable devaluation, that's the goal, yeah? Now deflation, right, is basically negative inflation, because if the higher, remember, we've already sorted that the higher inflation goes, the more devalued the currency, the same is true for deflation, so as prices go towards zero, or go towards minus 1%, yeah, or go towards minus 3%, yeah? Yeah, it's getting more expensive, yeah, because if this is devalued, yeah, and depreciating, then this now is getting actually, this is appreciating, right? Yeah, so this is appreciating, so each time you see prices go from minus zero to minus one, or from minus one to minus three, yeah, it's appreciating in value or getting more expensive, yeah? So this is, I guess the currency is getting cheaper, if you wanna, whatever the terminology I guess to use for being devalued, weaker, cheaper, depreciating, the opposite would be true for depreciation if you're looking at a negative scale. So when we go back to here, so the higher inflation is basically the weaker the currency, the more prices go towards deflation, which should mean that in fact, it's the opposite, right? It should be getting more and more expensive, yeah? So you're getting further away from actually the central bank target, yeah? Yeah, because they want a 2% more expensive. Exactly, it's getting more expensive, yeah? Now, the way to control inflation, yeah? The way that central banks around the world they compete is by monetary policy, yeah? And so monetary policy, what you wanna do is if your currency is getting weaker, so for example, let's say for example, it's at 3%, yeah? So your currency is getting weaker and weaker and it's rising down from two to three, three to four, four to five. What you wanna do is you want to make it, you want to create demand, yeah? For that currency to make it more attractive so that it doesn't become too weak. Is that correct, does that make sense? Yeah, yeah, makes sense. Right, so the way that you do that and the way that central banks have to do that is by giving you a higher interest rate. You have to make it more attractive. So one second, let me just get my annotates and I'll get this, yeah? Draw, can I draw this, right? So interest rates, the higher the interest rate is the more attractive, yeah? This is the desired effect and the more attractive something in is, is the more what demands there should be for that currency, right? Because if you go down the high street and you see that one bank is offering you maybe, you know, 3% interest rate, yeah? Or another bank is gonna offer you, let's say for example, 6% interest rate, where are you putting your money? 6% or two. There you go, there you go. As the consumer, right? That is more attractive than this, right? So then if you're hiking interest rates, so as inflation is going higher towards the 4%, 5% and if you offer a higher interest rate, that should have the desired effect of making your currency more attractive and if a currency becomes more attractive, then it should become more expensive, right? It should become more expensive because competition is more demand for it. It can't continue to get weaker, can it? And? Exactly, it has to become, you know, the desired effect is that people will start to pile into that currency and then that currency becomes more in demand and then inflation because if we know that this is, you know, devalued, right? The higher this goes, yeah, devalued. In fact, it increases the value of that currency, therefore increasing inflation, or sorry, decreasing inflation, so from four to three, from three to two, yeah? So this is increasing in value, yeah? So this is more appreciating. Yeah, that's the desired effect of hiking interest rates when inflation is above the 2% target. Now you understand, you get why they have to do it now. Yeah, brilliant, brilliant, yeah? That is literally it, yeah? So, but when, so if you understand that, then it works in the exact opposite way when we talk about deflation. Deflation. Right, so deflation, let's tackle deflation. Deflation is when a currency is more expensive, right? It's appreciating, yeah? Right, so it's expensive and it's appreciating. Appreciating, right? Now, if the currency is getting too expensive and is appreciating too much, then what do you have to do? If this is attractive, then you have to make it less attractive or unattractive. So that means your money's not giving any interest. It's actually charging. Exactly, you have to make it unattractive for people so that, because if it's too expensive, you want people to come out of the currency, right? You don't want them to pile into the currency because it's too expensive, you want them to come out. You want to disincentivise them to hold the currency, yeah? So you wanna make it unattractive and you make it unattractive by charging them. Whereas before, you would say, all right, then I want something with 6% inflation. Which one would you rather not, I guess the lesser of two evils would be, would you rather put your money in a bank that's gonna charge you 1% or 2% or 3%? Which one would you rather put your money in the bank? Would you rather put your money in the bank and charge you exactly? You'd rather put your money exactly. The lesser of two evils, right? So it's the more that negative interest rates go into the negative is the more unattractive or the less attractive this becomes. And then you don't get traders or investors who want to even use that currency. Therefore, if something's then expensive, it should become, the effect is that it should become less expensive because everyone doesn't want, no one wants to use it. So then as it goes from three, minus three to minus two to minus one, what is actually happening? It's not appreciating. It's actually doing what? It's depreciating. It's getting paid, it's getting devalued. It's going closer towards that's exactly it. Yeah, right, interesting. That's the way the economics works. That is exactly it. That is the economics. And this is what it amazes me, Simon. You know, once you know this stuff and know how to apply it, it amazes me. How is anyone a forex trader call themselves a forex trader, currency trader and they don't know this? Yeah, this is amazing information though. I really don't know how you survive. Once you know this stuff, you'll never look back to just look at the technical analysis and say, oh, because the price is here or price is there and we've got this price action. And this is the reason why prices will go higher or lower in the future is absolute nonsense. How can anyone say that? And you don't know this, the central banks are the ones that are controlling the valuation of the currency. They're not looking at price action. They're not looking at a price chart. This, exactly, this is what is moving price. And if you can understand this, yeah, and understand when a central bank says, okay, they're going into negative interest rates. For example, the Bank of England the other day, right? We said, they said it was rumors that it was going into negative interest rates. So what does that actually say about the value of the currency? What are they concerned with? It's getting more expensive. There you go. That's exact. And look what the pound has been doing against the dollar, right? If you look at a price chart right now, today is what, the 20th? The 20th of, or the 19th is 19th or 20th today? I think it's the 19th. Anyway, you know what it is. 19th. Right, 19th of January today. And if you look at where the pound dollar is, the pound has appreciated against the dollar. Yeah, and let's go. Now that you understand that, now that you understand this, do you want to take a picture of that? By the way, take a screenshot of that so that you've got something to refer to. Yeah. And we'll go- Actually, hold down some notes, but it will also still do, it'll still work. I mean, let me just take a picture. Yeah. No worries. Let me know when you take a picture of it. Because then once you understand this, then what we're going to do is we're going to go to trading economics, yeah? And we are going to see this actually play out in real life, yeah? Because then you can start to forecast, you can actually start to forecast where banks are what they think the value of a currency should be literally just based off of inflation and all what a central bank is doing with interest rates. Yeah? So if a central bank is talking about cutting interest rates, then it means that they are concerned with what, an appreciating currency or a depreciating currency. If they're cutting interest. If they're cutting rates, yeah, what's happening, what's happening to the currency? Is it appreciating or is it depreciating? No, it's depreciating. Exactly, that's exactly it, yeah? And a depreciating, oh, sorry, apologies. No, no, it's not. It's not, sorry, it's actually appreciating. It's actually appreciating because think about it. This is devalued, right? And even look at that, even myself, right? This is how this is the terminology. Oh, yeah. This is, remember, this is increased. It's increasing in value, yeah? Then we have, they're worried about the currency getting more expensive, yeah? As prices go into the negative, it's getting more and more expensive. So by cutting rates, they're trying to make it unattractive if they're going to cut rates or negative rates so that they can boost inflation and make it weaker or make it devalued. Yes. Yeah? I got it. So that is, you can understand now when you're reading an article, what the central bank actually thinks, yeah? Of the valuation of the currency if they are trying to cut rates in the same way if they're hiking rates, yeah? They are concerned with the fact that the currency is being devalued. Yeah? It's being devalued because exactly it's devaluing too much, that's exactly it. They have to look to high crates. So what does that information give us? If the central bank is saying, I want to high crates, yeah, they start to look to high crates, yeah? Then you understand that the currency should have been, so it been going down in value. That's what should have been happening, right? Because it will boost inflation as prices go down, then what is happening to inflation? Inflation should go higher, right? Does that make sense? Yeah. Because remember this is being devalued on a price chart. It's going lower and lower and lower, which means in fact inflation should be going higher and higher and higher as a result of prices going down, is that correct? You think that, yeah? And if something is getting more expensive, then that currency should be going in what direction? Exactly. That's exactly it. Yeah, that's it. And so we can look at this now. We can look at this and we can now say, all right, I'm gonna take the drawings off now. So we can now say, all right, then how does that look actually in real life? In real life, let's see how that looks. So let's go to Trading Economics, and let's go to the United States. Now, if you go to the currency, the currency has been getting weaker and weaker, yeah? So since March, March 2020, when we had a high of 102 now, where we've got a dollar valuation of 90, so that's basically depreciated, correct? Yes. Been depreciating, this is what inflation is. Inflation is a weaker currency, a cheaper currency, et cetera. So again, I get the confusion because when you say inflation, it's almost like what is increased in value, inflation increased, no, no, no, no, no. This is again, maybe the word, the terminology, the trickery that they used to maybe confuse traders, but once you get your head around it, then you'll understand, right? So that price has gone down in values, it's appreciated, which means that inflation should have done what? It should go higher, shouldn't it? It should go from one to two to three. That's the trajectory that you should see, correct? Yes, they're trying to make it more attractive. Exactly, no, no, no, don't do interest rates yet, but just talking about inflation. Yeah, just focus on inflation, yeah? So inflation should have done what? So inflation should do what? As prices are going down exactly, inflation should go from, if it was at zero, it should go from zero to one, one to two, two to three, yeah? Yeah. That's what should happen here. Yeah, so this, let me just get my drawing tool. So the effect should be, let's say for argument's sake, inflation was at zero percent here, yeah? Down here, it should be somewhere maybe closer to 2%, that's the theory, correct? That's what inflation should be, yeah? It's a positive too, yeah? So if that's the theory, yeah? Then let's go to a, let's go to inflation and let's see exactly if the theory is correct. So we go to- We're going to inflation or interest rates? There you go, inflation rate. Okay. So look what's happened since April or March 2020, what's happened? The inflation numbers have gone up. There you go, see? There you are. Yeah. So the fundamentals work, right? The fundamentals do work. Well, I said they do work even if it wasn't, that's what the mechanics of inflation does to prices and that's a desired effect of lower prices or what should happen on inflation. Yeah. Yeah? So lower prices mean, should mean higher inflation and let's look at the other way round now, yeah? So let's look at the other way round. So the other way round would be deflation, correct? Yeah. Right, so deflation as a reminder, remind me what deflation is. So is it when a currency gets more expensive, absolutely? So it's getting more expensive, it's appreciating in value, yeah? Which means then on a price chart, there you go, price should go higher. That's what we should see as we go deeper into that. Yep, that's what we should see. So let's see if that theory is correct or recently. Let's go to the euro, let's go to the euro and let's go to inflation, ah. And what have we seen? Negative interest rate, negative inflation, sorry, there you go, negative inflation, yeah? And a bit of an increase, but you can see the trajectory was going down. There you go. So then you reverse, so you know now the relationship between inflation and interest rates. So if you now read an article, a news article where the central bank, again is worried about, is looking to cut rates, then the effect is to try to weaken the currency. To make it unattractive. Exactly, to make it unattractive. If they're looking to hike rates, then they're trying to make it attractive. That's exactly it, that's exactly it. So cutting rates means it's on the inflation, it's expensive. And hiking rates, it means it's devalued to try to make it attractive. Exactly, inflation, that's exactly it. Yes. Yeah, so inflation is a leading indicator as to what the central bank has to do. Let me note that down, sorry. Inflation is the leading indicator. Yeah, inflation is the leading indicator for central banks. Yeah, so inflation is one. The other leading indicator is GDP. Yeah, so now we know inflation, and by the way, we didn't cover, we didn't cover actually quantitative easing, but just in a nutshell, the reason why quantitative easing is in this quadrant, yeah, or this half of the chart is because QE, quantitative easing or central bank intervention has the desired effect of basically weakening a currency or making it unattractive by printing more of it, yeah? So, yeah, so by printing more money, they're devaluing the currency in another way. Yeah, so just think about it like this. If you have, and I think the best way I can kind of think about it is this, is if you have, let's say, a limited edition, I don't know, anything. It could be trainers, it could be a car, et cetera. Then all of a sudden, that limited edition car or pair of trainers or watch, yeah? They start to make 10, 15, 20 of those, 50 of those, 100 of those. What does that do to the valuation of that item? Yeah, it goes down. There you go, yeah? So that's basically what the central banks are doing with money, yeah? I mean, it's not exactly the same to be fair, but the effect of that by increasing the money supply and by buying their own debts and things like that, by printing money out of thin air, it has the effect of devaluing the currency. Exactly, and if they're devaluing, that should counter deflation because deflation is when a currency is expensive, so that should make, you know, increase inflation. There you go, and it should want to do this, yeah? Because this is a member where devaluation is, yeah? So this is like what central banks do as a last resort. Yeah. Or in tandem with cutting interest rates into, for example, the negative, the negative, et cetera, yeah? So let's look at, for example, let's look at the Japanese yen, yeah, as an example. So the Japanese yen or the dollar yen, I'll test your knowledge now. So the dollar yen, currency pair, yeah, is now, it's been doing this over the past year. Yeah, so let's, in fact, let's go to the, no, well, actually, let's not go to it yet. So if this has been happening with the dollar yen, yeah, the question is, is from an inflation, or you know, from an inflation perspective or deflation perspective, what is the Japanese yen likely to be in? So is it supposed to be in the inflation area, or is it likely to be in the deflation area? Can you start with the USD first, or the... No, no, with the yen, with the yen. Just with the yen, yes. Let's say it's going up, right? So if it's going up, that means it's in deflation. There you go, brilliant past, past the flying colors, that's exactly it. Because the yen is the basic, I'm sorry, the quote currency, meaning that it's getting more expensive, the dollar is getting, you know, less expensive inflation, right? So you would think if you was to look at inflation, yeah, if you were to look at inflation or deflation, where would it be? And it would be in this half of the quadrant, right? So let's test that theory out. Yeah, let's see what that, if that theory is correct. So clear all drawings. Inflation should be the negative. Right, inflation should be, the trend should be to the downside. Whether it's negative or not, it should be getting more and more expensive from an inflation measurement perspective, correct? So let's go to, so you should see something like this with the Japanese yen, yeah? Yes. All right, something similar. So let's go to Japan. Let's go to inflation. Ta-da, there you go. Nailed it. There you go. There you are. Right. So it's almost up is down and black is white. You know, when it comes to understanding it, but once you understand it, then it's now it's just applying it because now we can go back to looking at, like I said, news articles and we can see, we can read it in one of two ways. We can say, all right, then inflation is, if inflation is going down, yeah? I mean, I should really say, inflation, yeah, if exactly inflation is inflating, let's say, yeah? So it's going from the trend is necessarily going from one to two to three. What are the central bank likely to do with interest rates? They're going to hike interest. There you go. That's it. And it's inflation or, you know, it's deflating, I guess, going towards the deflation, going towards the negative, then you know that they're going to do the opposite cut rates. And if they're happy with where inflation is, which is the 2% goal, this is the central bank target, then they just hold rates. That's it. And if they hold rates, and this is where now we can start to look for divergences or convergences, yeah? So now we're going to take it to another level. The next level now is the interest rate cycle. So let's say, for example, let's look at diverging interest rates. So we know that if a central bank is looking to hike rates, so they're trying to make it more attractive, yeah? And another central bank is cutting rates. So they're making it unattractive. The money is going to flow into, let's say, for example, the high, exactly the higher interest rates. If that's 1%, and this is, for example, minus 1%, yeah, they're cutting, yeah? Now it gets, and this is another thing where traders may get a bit confused, right? So just because a central bank has a higher interest rate, let's say, for example, one central bank has, let me just clear this. So with one country, yeah, has an interest rate at the moment of, let's say, 5%. But another central bank has an interest rate of 1%. Yeah, this is in this quadrant here now, yeah? In the positive territory. Now, if this central bank, central bank B, and this is central bank A, if central bank A, yeah, are looking to potentially cut rates, let's just say they wanted to cut rates, but central bank B are looking to hike rates, yeah, for some reason, what do you think would happen to the price? What do you think would happen to prices? Would prices increase, yeah, or increase in value if they're looking to hike rates? Well, I guess the question should be, the question should be, where would you put your money? Would you continue to put it in the higher interest rate one, or would you put it in the lower interest rate one? If these guys are cutting rates and these guys are hiking rates? Central bank B. Yeah, exactly, exactly. That is exactly it. Yeah. It's always putting your money in the currency that is looking to make it more attractive by increasing rates, no matter where, and I guess this is a bit of an extreme example because it depends on obviously what, in real life, this does happen, but it's quite rare, but the point is that you always want to put your money in the central bank that is hiking rates no matter what the interest rate may be. Yeah. It's always the hiking that is the most attractive, but most traders would say, all right, then well, I'm putting the fact that the, and even if, for example, let's say, for example, they were holding rates, so let's not say they're cutting rates, let's say they're holding rates. Yeah, so they're holding rates, but these guys are hiking rates, where would you put your money still? Where would you put your money? The one that's trying to make it attractive. They, no, exactly. So that's, and that is the key. Most traders would look at that and go, well, I'm still going to put my money in a higher interest rate, no. You have to put your money in the one that is appreciating. This one's staying still. This one is going from one to two to two to three, potentially. So this one is still the one to actually buy, not just because this is the higher interest rate that you have to put your money in the higher interest rate one. If these guys are holding, but these guys are hiking, put your money in the hiking of the interest rate that that one there, the lower interest rate one. Yeah, that makes sense. Yeah, so now that we understand inflation and interest rates, yeah, and the relationship between the two, then we have to throw GDP in the mix. GDP, all right, gross domestic product. So in a, sorry, do you know what, Simon, give me literally a minute or two, yeah? Give me a minute or two. I just want to do something quickly, yeah? All right, I'll just make the mic for about two minutes. All right, Simon, can you hear me? Yep, okay, great. Yeah, so now we're going to move over to GDP, yeah? And GDP, let's go to GDP. So gross domestic product is, so we've got an interest rate cycle, yeah? So, and this ties into GDP. So when we have a cut in interest rates, yeah? That usually, and typically will signal a contraction, a recession or a bust or slump phase of the GDP cycle or the business cycle, yeah? GDP's business cycle, yeah? And then we have, when economies are hiking rates, typically that is associated with recovery expansion, growth boom phase of the economy. And when central banks are holding interest rates, they are satisfied with the economy, yeah, they have a wait and see approach or the economy is not too hot, not too cold. That's the relationship, yeah? So you saw during the coronavirus last year that all central banks were doing what, to rates? Were they cutting rates or were they? I was looking at fundamentals. Sorry? I was not even looking at fundamentals because I was curious. Okay, well then take a guess then, take a guess. As you were going into this session, what do you think the central banks are doing? I think maybe hiking rates or... Why would they hike rates? Oh, they were cut. Yeah, we've gone into a recession, right? We've gone into a recession. Recession, contraction. Wasn't even a way. Yeah, right. So exactly, but I can show you that on trading economics, but take my word for it, they were cutting rates. They've been cutting rates. Yeah, only so because I was only treating Nasdaq at that time. Nasdaq was so dropped, so yeah. Okay, but definitely if we understand that this is typically what happens during the economic phases, this is the GDP phase. We understand now that this is what typically should happen, right? So central banks tend to hike rates when they're wearing a recovery expansion or the boom phase. So they were doing this basically. Yeah, so when it comes to the question as to why do they do this, why do they cut rates during this phase, right? And it's because if cutting rates is associated with what? Appreciation or depreciation? Is the currency getting more expensive or is it getting cheaper or devalued? It's when it's getting more expensive. Exactly, right? Expensive, brilliant. Now, in a recession, in a recession, yeah, or during the bad times, you want to actually have a devalued currency. So you want to have a cheap currency and you want your currency to be devalued. The reason why that is, the reason that is, is because you want to have a competitive exchange rate. Think about me and you where countries or where shops, yeah? Where the shop or on the shop of, you know, Leon and you're the shop of Simon. If we're both selling and or provided, we're saying they're selling the same item or we're providing the same service, the person or the country with the cheaper currency or the devalued currency is going to sell more, aren't they? They're going to export more. Why would anyone go to you? Go to you if you sell the same service as me or you provide the same service as me and yours is more expensive? So having an expensive currency, exactly, having an expensive currency is not good during the bad times. It's not good during the bad times. So a devalued currency is actually desirable. This is the effect that they want and this is the reason why they cut rates during the bad times. Yeah. Make sense? That's it. This is economics. This is what it is. It's funny because we think to ourselves, we try to... I think it's the terminology and the words of things, but once we figure this stuff out and we know the relationships, then we can extrapolate everything out and then we can see why things make sense. So then let's look at the opposite now. So let's look at the opposite. In the recovery when there's lots of growth and there's expansion of the boom phase, yeah, central banks will tend to high crates. Again, the question is, is why? Because it's cheaper. It's attractive. Yeah. All right. So as we're coming out of a recession, your currency should be devalued. Yeah. Then what happens is as your currency devalues, yeah, you want to make it more attractive by hiking rates. That's it. As you come out of the economic cycle, one of the things you want to do is you want to draw current people back into your economy, right? You want businesses to come back to your country. The way that you do that is providing higher interest rates, more of a return. Does that make sense? Yes. Exactly. So then that's why typically hikes are associated with the recovery phase because you want to draw demand from international investors in to your country or back into your country, save as you want people to use your currency, hold your currency because you want the desired effect is to make it more attractive. The country attractive AC. Yeah. Yeah. Attract. So that is the reason why interest rates tend to hike or go in a hiking cycle during the recovery phase or just after the bust or slump phase, as we know you have phases, right? So it goes like that where you have the contraction phase, the recession phase, bust or slump, recovery, expansion, then the boom, and then it keeps going back to the contraction again. So back here again and then it just repeats. Yeah. So as we're going through the recovery phase in, you know, after we've had a devaluation, inflation should be what? Inflation should be increasing and going higher. Therefore, if it's above the 2% target, you want to, you know, you want to stop the devaluation of that currency by doing what? By increasing or hiking interest rates. So it's a balancing act. They're trying to balance inflation, not they don't want it too hot and they don't want it too cold. Yeah. You don't understand. Yeah. And now that you understand that, Simon, everything now will make so much sense when you read, you know, Bloomberg articles from central bankers who start to talk about interest rates, inflation and GDP. So if, again, if a central bank is looking to hike rates, we know that they're trying to make it more attractive. And in fact, we potentially are in the recovery expansion boom phase. Whereas if a central bank is looking to cut rates, that the country may be trying to avoid contraction, recession or bust or slump. And those are what you notice divergence trades, right? So one is growing and one is shrinking. One is cutting rates. One is one is hiking rates. And so you buy the one that is more attractive and you sell the one that is unattractive. That's it. That's what that's all we do. That's it. That is economics 101. This is what they, I guess they, I suppose they try to teach you at school. But they maybe they teach it in a certain way that is a bit confusing. I've had economics students, university students that have said to me that in economics, in an economics course, it was never as clear as this. But this is it. And there's a lot to know, there's a lot to learn with economics. And I think this is one of the other things with fundamental analysis is that you can obviously go off into so many different areas and different tangents. But once you focus on the foundation on what you know to be true and how to apply what you know to be true to currencies, this is it. It actually makes a lot more sense of why things have been just getting more expensive here. Like an example, like I made loaf of bread was 250 later on during the years. It's now 1400. Yeah. So it's kind of like connecting all the dots now. Yeah. Yeah. This is it. Beyond this, beyond this, everything else is like a bonus. You know, I mean, if you just understand the relationship between interest rates, inflation and GDP, those three main things, those three core pillars of currency valuation. Once you understand that and you grasp that, then you'll always be ahead of the curve at least. Yeah. And sometimes it's not going to be clear, right? Sometimes you're going to have countries that are doing all the same thing. They're all going to be cutting rates. They're all going to be hiking rates. Yeah. It just happens in the world that we're in. But there are still divergences there and there are going to be divergences there. And once you spot those divergences or convergences, then that's when you act. Yeah. If you can't see anything or, you know, everything's on the same playing field, then unfortunately you have to kind of sit out. The money is made. Like money isn't made. Yes. The opportunity to make money is there every single day, every single minute, every single second, there's an opportunity to make money. You can just buy. But the right opportunity doesn't come around all of the time. Yeah. Yeah. That's it. And this is what we're doing in not just currencies. You need to, if you want to trade, for example, oil, if you want to trade copper, if you want to trade bonds, if you want to trade the stock market, whatever market you're in, you need to understand the fundamentals behind that asset class and what typically drives people and investors and big money into and out of that asset class. That is what fundamental analysis is. All right. And it's funny because I was thinking about this the other day as I was explaining something similar to another trader and, you know, if you, let's say, for example, you invest in property, right? Or you invest in cars, let's say. Yeah. Let's say you invest in cars. You don't go to a chart to find the price of, you know, the average price of a car or plot, you know, the price of a Lamborghini over the past, you know, 20, 30, 40 years to decide whether you want to buy a, you know, a new Lamborghini today or Ford or, you know, I mean, an Audi or a BMW, do you? You just don't do that. No. You don't do it. Yeah. Yeah. You would look at what is known as what the fundamentals, right? So you instinctively look to see whether that car or that brand is of value. Yeah. So you go there and you say, all right, then, you know, the person is selling it to you. You look at the engine size. You look at the age. You look at the model. You look at the color. You look at the, you know, the condition of the car. That's all fundamental analysis from what would make you attracted to that car and what makes that car either expensive, fair value or actually a bargain, right? It's nothing to do with looking at, you know, a car, you know, the price of a car on a price chart. You wouldn't make that decision in real life. You wouldn't invest in property doing that same thing, would you? You don't. You look at the condition of the house, if it has subsidence, if the area is a good area, is it high crime? Is it, you know, is it an area that's being gentrified and regeneration in the area? Is it good transport links, good schools? You know what I mean? Like that's what you look at. That's the fundamentals. That's the reason why people get involved in by property. Yet people would totally disregard that and go, you know what? I don't care. Like they'll say interest rates, inflation, GDP doesn't work. Yeah. Fundamentals don't work. So I'm just going to go look at a price chart to determine whether and it's nonsense because you don't do it in real life. No investor does that. But people do, you know, retail traders do that in their thousands every single day to make buying and selling decisions. Yeah. You could not be successful in real life looking at price action. I don't care. And then there is an argument you could say, obviously, there's the argument of past performance, you know, past areas of support and resistance and supply and demand and past patterns. I get it 100%. Yeah, I get that part of things. But even if you're a proponent and it's never one or the other because we're not one of the other, right? Where we use both. But the point is, is that the point I'm trying to make a guess is this is looking at technical analysis as your reason to buy or sell something that should not be it. It should be, okay, I want to go long or short on this currency pair because the central bank is doing this inflation is doing that GDP is doing this. That is the foremost. And then that's exactly it. Then you look for the recurring buying pattern or selling pattern on a price chart to manage your trade to place your, your, your, you to do your risk management to place your stop loss to look at your profit targets. It shouldn't be the other way around. You shouldn't be looking at a price chart and going, we're at demand zone now. I think I want to be a buyer. Like, no, you know, because you have no idea what the central bank is doing or what's coming down the line, whether we're in a risk on or risk off environment. You know, if money's going towards safe haven or commodity currencies, you have no idea. How can you make it? The video that made it clear, the video that makes, that makes it clear is the one that you left on YouTube, where you started dumping euro throughout the year and just avoiding the demand zones and just taking the supply. Exactly. Exactly. That's exactly it. Same thing with gold, gold and silver last year. All I did was buy at demand zones last year for silver. Yeah. I was not looking to, I was not looking at supply zones and that's trend trading. Exactly. That is trend trading 110%. We can predict the trend. We can predict trends or, or the likelihood of trends without even looking at a price chart. Yeah. By just reading what the central banks are thinking, the smartest guys in the room, or smart and smartest women, yeah, in the room are saying in their central bank statements, they say we're looking to cut rates instantly, instantly, what should you be doing? What should you be doing with that currency? If they're cutting rates, should you be buying that currency or should you be selling that currency? You should be selling it. There you go. That's exactly it. It literally is that. You know what I mean? If, if, if a country is going into a recession, yeah, what should you be doing to that currency? Selling it. There you go. That's exactly it. And if, and then what you do is you say, all right, then on the, on the flip side, where is the strongest currency? Because you're trying to remember trade divergences. So if one currency is going into recession, where is a, where is a country that is going, is, is, is growing, is booming, or they're, they're not, they're not cutting rates. That's exactly it. So you go for it. There you go. And that is literally it. That's all we do as currency traders. That's all we do as currency traders. And if you, you know, anyone who calls themselves a currency, you're a trader, right? You are a trader, right? If you can look at a price chart and you can just basically trade anything. Yeah. And it makes me laugh. You know, when you hear, you, you hear, um, you hear, um, uh, I guess, um, traders say things like, oh, the, the, the GU is my favorite currency pair. Yeah. And they don't understand fundamentals. It's like, how, you know what I mean? If you took away, like, and if you took away, if you play someone, all right, so let's say, for example, let's go to a chart. Yeah. Every technical analysis, every technical, um, one second, every chart should be your favorite. Yeah. Every chart should be your favorite or not your favorite. Because when you think about it, if I, from a price, from a price perspective, so I'm just trying to clear certain things. I want to do it. All right. Yeah. So from a price perspective, if I didn't know, if you take away the Australian dollar, US dollar, yeah, you wouldn't know whether this was a price of, of flipping. Um, I don't know. It could be anything. You wouldn't know what it was. You wouldn't know what it was, right? Yeah. Yeah. And then when someone says that it's their favorite, yeah, because for example, something is trending. Oh, this is a trending market. This is my favorite beyond the price chart. Yeah. Beyond the price chart, you could have the central bank then say, okay, well, you know, we're looking to cut rates and then another one looking to high crates and all of a sudden that, that trend will change or let's say, for example, it will start to range because, um, you know, the central banks are maybe in agreement of where they think value is their, their holding rates. Yeah. And they're happy with where price is. Then all of a sudden, their favorite pair, which was trending based off of just technical analysis. Yeah. Now all of a sudden starts to range. Then it starts, then it stops becoming their favorite pair, but they don't realize that until they start losing because they're thinking to themselves holding this pair was trending, right? It's not trending anymore. Why isn't it trending? But you can predict. They were probably holding their, their, their interest rates. There you go. Without even knowing it, without even knowing it, but they wouldn't know why a market is their favorite in the foot in the first place. And by the time they see the trend, they're probably too late anyway. Yeah. They're probably buying at the middle of the trend or the top of the, or the top of the trends. Cause I always say this, right? I'm always, I'm always saying this to, to, to trade it. This is, this is the trading conundrum before I go. Yeah. Let's say we have a downtrend and this is what trend traders and technical analysis traders will never admit to. They will never ever admit to this. If you go on YouTube, yeah. Ask your favorite trading, trading, uh, strategist. Yeah. When does the trend end? So let's say, for example, you're in a, you're in a, or when, when do we see a reversal, right? Or when does this downtrend stop? Yeah. So let's say, for example, prices start to come up to here and they start to do something like this. Are we in an uptrend or a downtrend? Usually with technical, as you break the lower high and create the higher low, it's, it seems like it's, it's, uh, trending up this change direction. But why this could just be, yeah, a deeper pullback, right? Yes. It could be the complex pullback as well. Yeah. So how do you know? Yeah. That's the thing. You know, exactly. It's very subjective, right? This could just be from this, from this high to this low. Yeah. And it also depends on the timeframe that you're trading, because some people will trade on the one minute, the one hour, the one day, you know, I mean, the one week. So it's going to give you different, different perspectives, right? So somebody might say you're in a downtrend, but if you go up to a higher timeframe, it actually might be an uptrend. Yeah. Yeah. But where does the trend end? Where does this trend, this could just be from this high to this low. This could just be a 38.2%. That's the most difficult question you can ask a technical trader. Exactly. But what do I know from a fundamental perspective? I know, yeah, and it's beyond, it's not even debatable if there's a currency that is cutting rates and is one that is hiking rates. There's no subjectivity around that, is it? Yeah. That's really not. If someone's going into a recession and the numbers come out, yeah, a country has just gone into two negative quarters, yeah, minus one and then minus two, for example, with their GDP growth, there's no subjectivity around that, is there? We're in a recession. So regardless of what happens here on this price chart, what you should be doing overall, just looking at pullbacks to look to go short in the medium to long term. Yeah. This is clear as day. This, you can make up whatever it is in your head and there's no consistency there. There's none. There's absolutely no consistency. One day it's a downtrend. But if you go down to the one minute, it's an uptrend. But if you go up to the 10 minute, it's a downtrend. I mean, and depending on where you move your chart and where you start the trend from and it's all subjective. Yeah, that's true. But this is not subjective. Yes, fundamentals has its challenges, right? It has its challenges. It's not all smooth and clear all the time. I'm not going to say that. But once you understand this and once you do have clear divergences as to which way you should be buying or selling. Yeah. Are we looking for pairs? Then this is where it becomes easier. And then you can have the faith that when prices pull back, you can just start to buy. If that level doesn't work, you just look for the lower level and you buy there, et cetera, et cetera. And that's all you're doing. It actually, it's going to bring a lot of confidence with the direction because there you go. The difficulty with fundamentals is filtering the noise. Yeah. It's filtering the noise and staying within the bubble of interest rates. So all roads lead back to interest rates, inflation and GDP. Yeah. And GDP. In fact, the market moves for three reasons. It will move because of value, which is basically what this is. So interest rates, inflation and GDP are all basically telling you what the value of that currency potentially is in comparison to another currency. So you compare inflation, interest rates and GDP to another country's inflation, interest rate and GDP. And then you decide whether the exchange rate value is a fair value, expensive or cheap. Right? Yeah. Right. So number one is value. Number two is risk sentiment. Yeah. So risk on, risk off, Ro Ro. Oh yeah. How do you see that it's risk on or risk off? Right. So you understand risk on or risk off basically from the risk environment that you're in. So risk on would be when an extreme version of risk off would be coronavirus. So risk off is when there's fear, uncertainty, that's risk off. Okay. Yeah. And if we're not in that environment or there's not that sentiment, you don't read that sentiment, then we're more likely to be in risk on. Risk on. Yeah. Right. So when we're in a risk off environment, where does money flow into safe haven assets, safe haven assets? Yeah. Like the Japanese yen, the Swiss franc, that's what they typically go. Yeah. We know where they go into and out of. Yeah. Okay. And then the third thing is liquidity. Yeah. Liquidity, liquidity. And these are the three things that move price. Price is manipulated. And once you understand these three things and you can put these three things together, then you should always be able to succeed in the market in the medium to long term. Yeah. Short term is more, short term price is driven by liquidity. So when I say short term price, you know, we're talking about, you know, the lower, the really kind of lower time frames because of, you know, market makers, you've got big people, you know, the big banks trying to buy all at the same time. So there needs to be enough liquidity, yeah, in the market for them to buy. Yeah. So short term price can be very erratic. Yeah. Even week to week, you can see prices not do anything because or go sideways. And that's what we know as to what the accumulation phase, right? So we know, for example, you know, a country is hiking or cutting rates. Yeah. And we want to trade, but yet prices might go sideways for a very long time. And it's because in a sideways market, the central, the banks and the big financial institutions are just accumulating. So they confuse traders with, you know, these structural levels that they can buy and manipulate, manipulate, manipulate for days and weeks and sometimes even months, just so that they can accumulate enough because they understand that the value of the currency or asset, you know, should be higher, much higher, much lower. But by the ranging market, it's giving them time to accumulate. And then when once they've accumulated, they'll push prices to where they think, you know, will will go and then they can basically just, you know, take profit at certain areas. But short term price, whenever people talk about, oh, well, this happened and, you know, it was positive news, but yet prices are going down. It's because of liquidity, because everybody can't be long and everybody can't be short. So what happens is, well, what can happen is that when you get positive news, yeah, and the market goes the other way is because it was searching for the liquidity, which if there's not enough liquidity to the upside, if I want to be a buyer and there's not enough sell orders above me to facilitate my buying, then I'm going to look for sell orders below the market. And I'm going to, you know, hoover that up, I'm going to take up that liquidity and it allows me to buy at a cheaper price. Yeah, buy down here, rather than buying up here. Right. And then what I can do once I start, you know, to buy at lower prices that I can drive prices to where I want to drive them. But these are the three things value, which is driven obviously by determined by fundamentals, risk on and risk off sentiment and liquidity. Beyond that, there's literally nothing else. The market moves for no other reason. No, it doesn't move because there's a pinball. Yeah. And before I go, before I do go, think about this. Yeah. There's I think there's something like maybe 10 banks of 10 financial institutions have a have a forex market share of around something like 50 to 60%. Yeah. They have a market share. So basically 10, about 10, 11, 12 banks control 50 percent of the market. And there are, you know, there are hundreds, there are thousands of market participants. Yeah. So if 10%, the top 10 banks are controlling 50%, these guys cannot be looking, cannot be looking at price action, can they? Because they're the ones that are creating the price action. They're creating the pinbars, they're creating the engulfing patterns, they're creating the support and resistance and supply and demand zones, they're creating it. So what are they looking towards if they're looking to buy something? They can't look towards price action because they're the ones creating the price action, right? It means they have to be looking at something else. And it can only be fundamental analysis, inflation, interest rates, risk sentiment. That's it. Yeah. Anything is most traders, we know that the money is moved by the central bank traders, not like retail traders. Yeah, exactly. That's exactly it. You're right. It's moved by those guys. And yes, I think people generally traders want instant gratification. They want, you know, someone say, oh, they're cutting rates, price should go down right now because I'm in this trade and I've pressed sell or I've gone long and prices should go up right now. No, that's not how it works. If there's a thousand banks that see the same thing, yeah, and they understand, they all want to get in, they all want to get in at the same time. So they don't want to buy with everyone else. So what they'll do is they will manipulate the market and they will take their time. Yeah, they will take their time to accumulate. Sometimes yes, you'll see prices start to, you know, their big order will come in and prices will trend, right? There are times when that happens. Of course it happens like that. Yeah, but in general, in general, the banks are not silly, right? There needs to be enough liquidity in the market. And if there's not enough liquidity, then the market will, you know, maybe go higher, draw traders into the upside and then stop them out and create their, you know, take the liquidity out on them, draw traders in the shore and then, you know, manipulate the market to the point where overall over maybe two, three, four, five, six, seven, 10 months, 11 months, you'll see this. But during day to day, you know, for the day trader who wants to make money today and if prices are going down, but it will say, oh, but the central banks are the never cutting rates. That means that, you know, or hiking rates, which means that prices should go up, but it's going down today or it's going down this week. Oh, that doesn't make any sense. That's nonsense. You know what I mean? Because they're so short-sighted and don't understand how the game works for the medium to long term, that they just totally disregard fundamental analysis for the long term. And this is where the path of least resistance actually is. Yes. One last question before you go. I saw on the sheets, there's year on year quarter on quarter, months to month. Do they also just produce these interest rates, GDPs on a monthly basis and quarter basis and year to year? They generally do because the more leading indicator would be month to month, right? If you're measuring inflation month to month, then quarter to quarter, yes. So you can kind of see where the projection is going if you're measuring inflation in the short term. You can see more short term trends. We should lead to longer term trends. So it is important to keep an eye on, you know, but in general, you know, what we have on our fundamental analysis spreadsheet is good enough. So is it based on that the spreadsheet itself? So number one is NZDE, is that based on a monthly or quarter? That's just based on the data that we have. So it's based on the monthly and the quarterly. So it's current data. So