 Hi, my name is Leon Roe currency trader and trading coach at trading 180.com and welcome to this video on Fundamental analysis deep dive. I'm gonna be showing you how I you know predicted price directions on a certain currency pair using fundamental analysis and Supply and demand I've been getting a lot of Questions regarding Fundamental analysis and I'm gonna go make a bold statement that you're not gonna find anything like this video On line, right? I've watched a lot of fundamental analysis videos And nothing is going to be like this video. So stay tuned and you're gonna get a real insight into You know real fundamental analysis for You know swing trading rights fundamental analysis macroeconomic data is not You know fundamentals don't change Every single day or even every single week. You know, I have a longer term View and then what I do is You know, basically what I'm gonna show you now. So let's get into it Euro dollar 2019 downtrend could this have been predicted? Of course it could and Not to say that I am right on all predictions. In fact, I don't even like using the word predictions because What I tend to do is just it's just basically the balance of probabilities are one thing happening over another of course I can be wrong be right, but when I'm right We try to make as much, you know as we can when you're right then when you're wrong We're risk managers when it comes to You know trading but the question is is why did price of the euro dollar fall throughout 2019 and for those of you who have watched my videos for long enough You'll definitely know that all this year in fact for the past two and a half years All I've been doing is shorting the euro dollar. I've ignored demand zones and I've been shorting the dollar And I want to actually show you exactly why I was doing that throughout 2019 so How do we determine price? Direction so what I have to do is I have to compare gross domestic products inflation and interest rates because That is what drives Currencies yeah, that you have to in every single market in every single market You have to determine what it is that Gives a currency its value. So what we're doing is we're comparing the euro GDP Inflation and interest rate figures with the US dollar GDP interest rate and inflation figures Right, and this isn't going to get complex or anything like that I'm going to try and break it down as simply as I can and if you want to go into a bit more depth I do have a free You know trading course fundamental analysis the link is right here And it's in the description box below if you're watching this on YouTube, but let's get into it quickly and so What we're looking at is we're going to be comparing GDP right so gross domestic products and every economy has and you know Economic phases so you have the boom phase contraction recession bus slump recovery and expansion again back into the boom phase so What we need to determine is Where a country is in its economic cycle? So Let me do that by looking at basically just comparing its Where it is GDP wise so this is a great site trading economics and what I did was I compared the euro zone GDP growth rate to the United States growth rate now on the left axis here. You've got the euro Numbers figures so the euro at the moment was at the moment but in back in July or sorry January 2019 The GDP growth rate was 0.3. Whereas the US at the time was probably Go like this one second. Let me just bring up this tool Maybe around about here. Well, maybe about around about 2% yeah, so instantly you've got the Euro right euro growth rate is at 0.3% and you've got the US which is at around about 2% So instantly if we're looking at the country's economic health Which one do you want to be a buyer of? Which one is doing better? Yeah, it's obviously the dollar right the euro isn't doing so well so That should then Give you, you know the a direction or part of the direction of which way you really want to be Buying or selling. Yeah, because the closer you are a country is to a recession Yeah, closer is to a recession the worse It's gonna be for that currency and the closer it is towards the you know expansion and the boom phase of The economic cycle. Yeah, that's where Investment and the currency is going to strengthen. So what you're doing is you're comparing, you know divergences in You know where a country is? economically So the next thing that we have to also look at is inflation So we're looking at an inflation comparison. Yeah, you can see that with the euro When it comes to inflation Into 2019 to April so beginning of 2019 inflation expectations were well expectation, but the figures were at 1.4% now a central bank has an inflation target of 2% Yeah, they deem that to be you know the optimum inflation per year. So Central banks will do certain things and I'm going to get into that in the next slide, which is basically try to stimulate inflation by Hiking holding or cutting interest rates, but in this slide We need to understand that central banks have an inflation target of 2% So again at a certain point in time. Yeah in the beginning of the year You had the January you had the euro which was at 1.4% and then you had the The US dollar which we go to the left was around 1.6% At the time. Yeah, so again, we had Euro 1.4. Oh, sorry, let's delete that Euro 1.4 1.4 percent when it comes to inflation Remember their target is 2% Dollar which was at 1.6 percent so whoever's closest to this 2% figure is Better right so the euro was furthest away so They're not doing so well so out of GDP and inflation Yeah, the euro is losing on both accounts and the dollar is the stronger out of the two So next we have Looted to it. We have interest rate comparison. So interest rates are used by, you know central banks to Stimulate the economy. Yeah, or cool the economy So interest rates are basically the return that you get back on your money if you invest in You know if you put it in the bank or if you invest in a certain currency So the higher the interest rates the better. Yeah, so if I'm putting my money into a currency What currency am I going to get the best return on or investors? You're gonna get the best return on so the European central bank We're offering 0% All right, if you put your money into the euro, you know, they're gonna be offering you 0% in January that was that Yeah, whereas the US dollar on the other hand, we're gonna be offering you at least 2.5 maybe 2.5 somewhere like that in January So again euro equals 0% and the dollar equals Around about 2.5% at a time. Yeah so By all measures by all economic measures the dollar is You know the stronger out of the two It just it just makes sense, you know, you can't like argue with with the data Right the data is the data and this is where you know the country's doing better to get a better return, etc so It's a no-brainer now to actually put your money into the dollar over the Over the euro as we expect the dollar to strengthen or be the stronger out of the two so What I decided to do was put together I'm gonna go through pretty much 12 slides and The reason why I'm doing this I'm gonna go through January pretty much through to December 2019 and I'm gonna show you what the The data was as well as what the fundamentals were now What you need to understand is that we are buying We are trying to predict future value. Yeah, so it's not necessarily about some time It's not always about I'm like where we are right now, but where we are potentially going to be in the future The whole thing of buy the room is sell the fact for example that traders tend to talk about is You're trying to identify where there is a bargain and once other traders now, you know catch up to the bargain is in as far as you know Buy the fact. It's already too late We buy the rumor. Yeah, or we buy the narrative and as long as the narrative continues So let's say for example the beginning of the year there was rumors and talks that Germany we're gonna be going into a recession the European Central Bank were going to You know add more stimulus, which is basically they run out of interest rate bullets So basically they're trying to make their currency cheaper and by the way going back to You know interest rates as well Interest rates and a cut hike or a hold in interest rates is a central bank who are the pretty much the controllers of the currency Yeah, they're trying they're actually telling you that they want to Weaken the currency if they're trying to cut interest rates if they are hiking interest rates They want to strengthen the the the currency yeah, so a central bank policy never ever Disregard these are the smartest guys in the room. Yeah, these are the guys that look at all You know the economy they look at all the data way beyond what we can look at and really fathom and understand in Certain detail. This is what they live for. Yeah, they got access to all the data And based on that they are telling you what they are planning to do We are planning to either hike hold or cut and the currency again. This is in the the fundamental analysis Course but if a central bank Yeah, typically if a central bank is cutting interest rates, it means It is associated with a potentially weakening economy Yeah So cuts are Potentially a weakening economy and they need to weaken the currency yeah in order to produce Inflation if they're below the inflation target as well as you know stimulate the economy cheap borrowing, etc And if they are hiking interest rates, it means that they are trying to strengthen the cut the the the currency Yeah, R. E. N. G G. T. H. Sorry about this. All right, T. H. I did it all the way around. Don't scan on anyways, you're trying to strengthen their currency Right, so that is pretty much how interest rates and inflation and And GDP work and their relationship to each other so future value We need to start reading news and understanding the narrative once we know the data is understanding narrative and have a trade idea i.e. the Dollar are going to potentially, you know continue to hike rates or hold rates Compared to the European central bank who are looking to potentially cut rates or add Stimulus yeah, which is basically weakening their currency And we need to also be mindful of what the economy is doing when it comes to you know central banks making their Decisions as to what they exactly they're going to do with interest rates. So the two things we're watching really is inflation and GDP and that should have an effect on what the central banks are going to do with their interest rates so January 2019 and January for 2019 so this was from the New York Times and Washington is by the way as well just before we get into that It's a January, you know that the Fed were basically hiking rates right and strengthening their currency While the central but the European central bank were at zero. Yeah, so just keep that in mind so In interspending its previous plans to continue raising rates further this year the federal reserve signaled that it's March Towards higher interest rates may be ending sooner than expected. Okay, so they're in a good place Ending, you know hiking or trying to not necessarily strengthen their currency doesn't mean that it's gonna get it's gonna get weaker, right? It just means that they're happy with where things are right and at the same time you have the European Central Bank ECB Dragui warns on risking a rising risks to growth amid global headwinds. So the the headlines were The risks around in the euro area have moved to the downside On on account of the persistent uncertainties related to geopolitical factors, etc And then Dragui also reaffirmed The central bank starts to keep key interest rates at their present levels throughout the summer of 2019 and longer if necessary Yeah, so they're telling you the central bank Mario Dragui ex, you know head of the ECB is telling you He's doing his predictions. Yeah, it's not me making my predictions. He's saying based off of the data This is what is likely to happen. Then all we have to do. Yeah is The idea is there The trade idea is there dollar strength Euro weakness now we just go through every, you know week and every month We look at certain economic data that reinforces that narrative or if it goes against the narrative So at this point in time January begin of the year the central bank European central bank could be saying Oh, right, then we'll be we're planning to hold rates for longer Because they don't expect inflation to necessarily, you know creep up But inflation could have crept up. Yeah, January February March April May and then as the data comes out then their stance changes follow me so Even though they make their predictions, it's not set in stone It's data dependent depending on obviously the data comes out and then they start to analyze every month every week, etc What their policies will be in the future? But as long as you have a trade idea first dollar strength Euro weakness and then what you do is you go to You know the the data every week every month and then look to see if the data is confirming your narrative So that was January February Jamie Feds James Bullard says he's pleased with rates at these levels and it's time to wait and see so they're happy Happy with the economy happy with rates. No need to you know a strength and they're just holding rates brilliant European Central Bank on the other hand ECB rate moves hinges on downturn so timing of the European Central Bank's first post-crisis rate hike hinges on weather Speak about a rate hike, but if you go deeper into this it actually Talks about the slowdown so hinges on the eurozone current current euro zones current slowdown Is a blip more than a projected downturn? So obviously, you know, there were there were concerns that the in February that the the current slowdown They were hoping that it was just a blip Right or they were praying that it was just a blip or if they would they would they were concerned Whether it was a protracted downturn, right? So this is ECB's policymaker Francois Villarroix de Galhalla. I think I'm sorry, but she's named but interviewed in the published on Sunday So the ECB set has said it aims to keep interest rates Current record lows at least through the summer again, so they're reiterating that it's they're not looking to hike rates at all they're trying to keep it at its lows again the Federal Reserve Got rates at 2.5 percent and the European Union have got rates at zero Where are you putting your money? March again future value divergence. Yeah, so we've got Europe I'm sorry the Fed so there's an article that says why has the Fed turned away from interest rate rises? Yeah, so the Fed Federal Reserve surprised Marcus recently with a large and unexpected policy change When the federal Open Market Committee FOMC met in December Increased the Fed's policy rate to from 2.25 to 2.5 a signal that it would raise the benchmark rate another three times Yeah before stopping it has it has also signaled that it would continue to unwind his balance sheets Blah blah blah and then just below it So don't if you can see this but just off the screen it says but just six weeks later at the FOMC meeting in January The Fed indicated it would pause. Let me just let me just bring this up a little bit So you can see this Yeah That's the one here we go, right? So it says six weeks later the Fed indicated that it would pause Its rate rises for the foreseeable future. Yeah, and suspend its balance sheet Blah blah blah, right so instead of hiking rates now They're just holding rates at 2.5. Yeah, which is a bit dovish bit changing policy, but What were the European Central Bank looking to do so the European Central Bank? reacts to recession threats by keeping interest rates low so There was even talk of recession European Central Bank has reacted to the threat of a recession across the eurozone There's no risk that there was no recession talk, right with the with the US economy It will fall from a recession. Actually, they might have been I mean the doom and gloomers You know who were talking about recession and Donald Trump political and all that kind of stuff It was actually nonsense because you have for a session. You have to have two negative quarters right of GDP growth and in the next slide. I'm going to basically show you where the the Europe where Europe was was when it came to GDP and where the The the US was but there was talk of a recession why it's a highlight in a dramatic effect to Donald Trump trade war with China and On Europe's manufacturing industry the ECB president marriage argues said he would offer also offer cheap loans to eurozone's troubled banks Right, so it's nothing. It's it's it's basically he's talking about Keeping the currency as cheap as possible. So again, it's like the dog with the least fleets. Yeah, there are Things happening all around the world trade wars brexit, etc. That are going to be affecting all countries Yeah, but which country is best placed to weather the storm? Is it the US or is it Europe? That's the question you have to ask yourself and it was clearly the US yeah, so Again, April and Let's see what's happening in April. So April right we get to April and we look at GDP growth So Europe Was at zero point four percent So remember zero by the way a zero growth or negative growth two quarters of negative growth equals a Recession so the closer you are to zero the closer you are to recession, right? So Europe were at zero point four percent GDP growth rate growth US on the other hand were At a round in April around three percent Yeah, three percent growth. So again, who's closer to recession negative, you know, two quarters of negative growth Europe or US It's got to be Europe. All right, so And then you know the numbers are the numbers Regardless of what conspiracy theory you believe the numbers are the numbers. So again in April Trump calls on the Fed to cut rates by one percent and urges more quantitative easing this was due to really the Fed and sorry the Donald Trump I should say Was in a bit of a is you know with his trade wars with China He actually wants he wanted a cheaper Dollar and I'm not going to necessarily going to get into this But he was putting pressure on the Federal Reserve to potentially cut rates so he can have a bit of a competitive advantage in Negotiating with China because China have a cheap currency and Long and short of it is Donald Trump is trying to bring jobs back to America and manufacturing back to America but he can't compete with China because businesses can manufacture You know their goods in China and obviously export from China to the rest of the world because their currency is very cheap If I'm a manufacturer, I'm not manufacturing my goods in America because it's too expensive That's the long and short of it. So But overall everything was you know was it was okay for for the for the dollar And we can see again interest rates in April 2.5 percent still and in Europe It was still at zero now European central bank holds interest rates as druggy warns of downside risks So again the ECB has been forced to backtrack on his plans to tighten monetary policy in recent weeks and made intensifying climate of economic gloom Right, so interest rates Da da da da euros to little changed and it talks about the European central bank Standing fire holding fire on interest rates But it's been forced to backtrack on his plans to tighten monetary policy and make intensifying Economic gloom because I think what they were talking about earlier was that they wanted to try potentially to raise rates towards the end of the year Or look to anyway, but obviously doom and gloom Economic the economy not doing so well. Yeah They can't so again Risks to the downside, etc. Etc. Where the dollar it will probably see in risks as well, but not As severe as Europe Let's also take a look at what the technicals were saying because it's all good looking at the fundamentals But I know a lot of you again. Well, what's happening on the price chart at the time? Well, we can see pretty much beginning of the year Right beginning of the year 2019 What was occurring so? We had a bit of a downtrend didn't we all we needed to do was literally look for pullbacks into Supply zones ignore I was ignoring the demand zone They're just looking at shorting because in order for me to buy the US dollar against the euro I have to press sell on my broker, which is supply. Yeah, so If you're buying the quote currency, you have to press sell So this was just a case of waiting for prices to pull back into past supply zones Right and then looking for buying opportunities on the dollar. Yeah, this is where The the money is being made that's not to say that you couldn't have made money buying the euro But would that have been the best decision to make? Yeah, you got to think about, you know If you're buying weakness, it's not not necessarily a high probability trade. Yes Prices did go up and prices always, you know, pull back and retrace because banks and financial institutions and the smart money are not buying At lows, they're gonna be buying at highs. This is where They need to buy so Without getting into market manipulations too much iceberg orders slippage and liquidity Prices will pull back. Yeah, and when it does what you do is and we don't know whether this supply zone is gonna work And we've got to think in terms of probabilities but if the dollar is stronger than the Then the euro and we have belief in our fundamentals Then we use the technicals to time our entries and this is pretty much up to, you know, the whole of April into May so So, yeah, you know the fundamentals Driving price price doesn't indicate value. Value isn't always reflected in price. Yeah, price is not the be all and end all Yeah We need to understand what's going on beyond Technical analysis and then time our entries. So moving on to May Moving on into May. So May the Fed defies Trump and holds interest rates All right, US Fed defies Trump and holds interest rates. So again Fed We're holding interest rates at 2.5% and then we had an ECB Article which was basically saying low interest rates to stay banks should merge and then it says the interest European Central Bank are likely to Interest rates are likely to stay low for a long time and banks in the euro area Should consolidate and step up efforts to improve Profitability if you scroll down low interest rate environment is with us for the foreseeable future and is caused in large part by Durable structural factors. Yes. So again doom and gloom for Europe more than, you know, it would be when it comes to, you know, the Fed and and America right so June the Fed opens the door to interest rate cuts after Trump criticism And so the Fed now Deciding that potentially there are headwinds Going on with You know, the economy etc. And there's a bit of pressure going on the member these guys are forward thinking so they're seeing the risks of The trade will potentially take effect on the US economy again No one knows exactly how it's going to affect the economy, but the Fed have to be forward thinking and take all You know data into consideration. So in order for them to You know kind of protect the US economy. Yeah and boost suspending and etc They have to be forward thinking and potentially open the door for interest rate cuts Whereas the dollar, sorry euro dollar, right? They talk about Euro Maria Draghi starts talking about a euro steady but inflation data poses all questions for ECB CPI more than Unwinds is the bumper head of Thursday's ECB UBS says the market inflation expectations hit lowest since early 2016 so inflation expectations are the lowest You know and with low ex with low inflation means potentially Stimulus because they need to reach their 2% inflation target and if interests If the inflation targets are actually low then potentially they they can't raise interest rates So the euro supported by a Fed rate cut talk, but analysts doubt this will last long So what's happening is or what happened is? In June, I think we're in June was the fact that the Fed would then started talking about rate cuts and the European Central Bank were probably a bit more silent on their policies. So You know, there was maybe kind of maybe a sentiment shift why in In in, you know potential strength for weakness, but the data didn't really support that, right? So the euro was stable against week dollar and third on Tuesday Even after inflation date for the month of May surprise sharply to the downside There you go says inflation was to the downside potentially posing the all-question for the European Central Bank ECB on Thursday, although the single currency is currently focused on events across the Atlantic So eurozone inflation fell to 1.2 in May from 1.7 So they getting further and further away from their inflation target of 2% So this is again, this is below the market consensus for reading a 1.4 has more than unwinded a basis points increase, etc. So The Europe, you know, Europe and America have their problems and again, I'll repeat this It's like the dog with the least fleas. Yeah, so what? Country even though they're both going through problems has the worst problems who has the worst who has the most amount of fleas, right? And so you have to try and bet on the dog with the least fleas So at the moment, it's the European Central Bank are in a worse situation than the US regardless of where with the focus You know was on them cutting rates remember their cutting rates to 2.25 if they have low if the European Central Bank have low inflation They can't they haven't got any rates to cut because their interest rates are already at zero So they have to introduce stimulus, which is basically a very severe form of trying to cheapen their currency and weaken their currency. Yeah So again They're both in the same boat, but the European Central Bank is definitely a lot worse than the Fed You know into July so July big banks Signal Fed cuts may not be so great for them and then it talks about JP Morgan Well, it's far go spent time and Tuesday describing the earners outlook if if the Fed cut rates, right? Which I think they obviously ended up doing and it talks about how the banks will be probably impacted potentially You know if they do cut rates a few largest banks and Tuesday warned investors of the effect of multiple interest rate cuts by The Federal Reserve could have on their bottom lines throughout 2019. So there was definitely talk again of Fed cuts But again, what was happening in Europe? So Europe? ECB signals it will move to boost growth amid fears of low inflation So our grand president says outlook is worsening and inflation is well below target. So again You've got the European Central Bank Not doing so well and the Fed doing better even though they're not doing so well and Let's also look at the data that supports this as well. So again going back to the GDP Euro growth rates. We are in July. So GDP ended up coming in at think of round 0.2 Let's get it all out. Yes about 0.2 right there not great at all. Whereas GDP for the US was at 2% so you can see the divergence in in in GDP growth rate The US is doing a lot better. And in fact, the Europe are closer to You know zero when it comes to, you know Their economy growing and they don't want to go into the minus because then that would be, you know to negative quarters would be the recession. So again People were talking about the US inflation and I was saying is to all the traders. I said do not Think that the US is going into a recession before Europe right Europe will go into recession way before With a probabilities anyway the chances of that happening the Europe will go into recession Before the US because they are closer to negative interest rates So again, we're looking at inflation as well. So inflation around July inflation for the Eurozone in July was around 1% again further from their 2% target and whereas the US In July Was at 1.8% Yeah, so they're closer to their 2% target, aren't they? Yeah So again Nothing for the US to worry about if you're on it if you're looking at a price chart Right, which we're going to look at in a sec. Why are we? You know worried about or looking to buy the euro. So let's go to the next slide and Look at the chart. So we've got July and let's break it down. So We already had in in kind of May, June there was the Fed were talking about you know having to cut interest rates and It probably had a bit of an effect obviously on price But overall again, all we were doing was looking for levels to get short at There was a few pips in here. This is a daily talk chart by the way So maybe a couple of hundred pips in there again, maybe that move didn't work there But again, just get short around here and then We understand that we should be getting short and trying to ignore, you know, demand zones regardless whether you know prices go higher Is that or was that the best decision when you understand what was going on fundamentals? A lot of traders will say things like I'm a trend trader yet, you know They don't understand the bigger trend or they they don't follow it through They're not disciplined enough to follow it through and yes We may have had to wait, you know a day or two or even a week or two in order to get short at certain areas But this is where the trend was it was to the downside. Yeah, so Again fundamentals, you know coming in there's always going to be some short-term sentiment plays when it comes to When it comes to, you know prices pulling back etc. That's just you know what the market does But overall the bigger picture it was really, you know, trying to get short at supply zones So moving into August and August the Fed's mild rate Turn crushes US inflation expectations So this was about US investors in inflation expectations were hammered on Thursday a day after the Fed You know cut interest rates for the first time since 2008 while chairman Jerome Powell's signal to central bank had not entered Into an outright easing cycle. So President Donald Trump threats more tariffs and Chinese goods eroded vests confidence on whether domestic inflation would ever reach the Fed's 2% goal analysts said so there was a bit of problems, you know with the with the Fed and And then and reaching their inflation targets, but when you again when you compare that to You know Europe again a combination of measures may be needed to prop up the eurozone economy as recent indicators paint an Even bleaker picture of the outlook. So European Central Bank policymaker said their July meeting the accounts of the meeting showed On Thursday with growth in inflation slowing for months easy to be president marriage Argy has all but promised more stimulus as soon as September. So he's going into he can't cut rates Yeah, all central banks. Yeah at the this year. I say all central banks, but most central banks apart from maybe Canada The Canadian central bank have entered into an interest rate cutting cycle They all want a cheaper currency and a cheaper currency isn't bad a cheaper currency is actually very useful because What it does is it boosts exports? For the country. Yeah, so a cheap currency isn't terrible It's not a bad thing is actually quite a good thing and hence the reason why Donald Trump has been You know putting pressure on the Fed to cut rates to make the currency cheaper so that they can boost US exports, but again dog with the least fleas which one is worse is worse often as bad as this one actually Sounds this is this report actually sounds in August. Yeah, it sounded quite bad Who's worse off the Fed or you know, the European Central Bank Europe or America again? It has to be America. Sorry America has to be Europe because you know Europe haven't caught even cut rates. They're going to introduce stimulus, right? They're going to introduce stimulus, which is basically quantitative easing Which is a severe form when they haven't you know of cheapening and weakening their currency to achieve their 2% inflation target And also, you know, stimulate the economy So moving into September September so Rate Fed rates interest rate cuts don't hurt, but analysts don't see rates help to US auto sales So this basically this is basically talking about a piece. It's talking about the Federal Reserve Cutting rates last week, but they're not rejoicing either and it was more. I remember this was more to do with more of an insurance cut There really wasn't an need to cut rates. They were kind of Looking forward into the future as they always do, but just kind of anticipating more What a rate cut would do for the economy to keep the economy, you know ticking over nicely Whereas the European Central Bank Announces fresh stimulus right as eurozone economy falters and the European Central Bank had announced Fresh stimulus package in an attempt to prevent the fragile eurozone economy from grinding to a halt With an interest rate cut and plans to pump to pump 20 billion a month into the financial market so again They're worse off. Yeah, as much as the Fed are cutting rates, which Australia the Reserve Bank of Australia were cutting rates the the Reserve Bank of New Zealand were cutting rates Central banks around the world are also cutting rates But there are three central banks who can no longer cut rates for major ones, which is the European Central Bank the When it can cut rates, but to go into negative interest rates, but I don't really necessarily want to But you also have the Bank of Japan, which are already a negative interest rates And also the Swiss National Bank who are also in negative rates So a positive cut and when I say a positive cut rates that are in the positive that are being cut is less worse than You know a central bank introducing stimulus, right? This is a stimulus in September which was very bad for the For the European Central Bank and then we enter into October. Yeah, October's Fundamentals so risk of recession isn't high as long as Fed gets the policy right So this is the probability of a recession and this was I think the second in command Fed's number two says consumers have cushioned With high savings rate and he goes into basically talking about the recession the risk of a recession remains low with appropriate monetary policy Clarita said during a question and answer session sponsored by the Wall Street Journal So Clarita stressed the economy is in a good place with stable inflation financial conditions are also Not tight In addition the savings rose to 8.1 etc. etc. All right, so He's saying that they're in a good place What are the european central banks saying right? So ECB is saying they must be careful about the about further interest rate cuts so they just introduce stimulus right so It's saying that the european central bank must be careful in lowering interest rates further given the risk of unintended side effects italian central bank chief In i'm not even going to attempt to say that visco said on thursday And it talks about the ECB cutting rates to interest to minus 0.5 And markets pricing further cuts for the coming years in the face of exceptionally weak inflation pressures You know, so they're already in a bad place Right, they're already in a bad place. So visco considered a dove in ECB's rates in governing council noted that negative rates hurt banks Which ultimately transmits monetary policy to the real economy So lower rates could prove counterproductive and they're trying to basically Downplay the need or talk down down talk the need for further Weakening of the currency. So again, you've got divergence clear divergence between, you know, um, the number two in command And the italian central banker, uh, you know in in tone, right? So let's look at the actual data You know in the third quarter right and into october Right, we have again Let's Pull this over You have the european central bank GDP growth rate, I should say Looking at this the european central bank is looking at growth rate GDP as 0.2 again. Right whereas you have the um the us economy is looking at At least above two percent Growth rate. I think it's like 2.1 or something like that 2.2. So again, there's a clear divergence in where The countries are in their economic cycle and also as well look at inflation In october look at inflation for europe inflation for europe Pretty much dropped To below Uh, was that maybe 0.7 or something like that? Maybe yeah something like 0.7 percent inflation for europe and when you look at again In october 1.8 percent inflation rate 1.8 percent inflation rate. Yeah for the us So again, they're closer to their two percent target and the european central bank are way Off they're down here and they need to get somewhere up here Yeah, above there anyway So again, you've got divergence in policies. Who's worse off and I keep repeating myself, but um, you know, this needs you need to actually Understand this is how the market works. You know, it there's not some, you know, it's no they're not looking at price They're not nowhere in here. Yeah, have you ever heard a central banker talk about Pin bars against support and resistance. Yeah, you've never heard someone say engulfing candles and refer to You know any kind of indicators, right as to you know, why they're going to be Strengthening or cheapening the currency. Yeah, they do they control the currency and then we see it on a price chart So let's let's to go look at a price chart So from august september october third court three quarters Um, you know, we saw in september that the european central bank started introducing stimulus, right and Again in the lead up to stimulus. This was Anticipated. Yeah, this is all anticipated because we knew from july from may etc that this was going to happen So september, this is where they introduce stimulus prices like you know going down putting back you sell at supply Yeah, it's like putting back etc. Right and again markets don't go down forever. There was some probably some sentiment plays in october Right where um, you know again pullbacks the banks don't want to buy at lows What they're looking for is pullbacks and they're scaling etc And all we're looking to do is buy at levels of supply does every supply zone work? No, you know Because again, there could have been some you know negative sentiment data for the us in these Situations right here in between. You know the bigger picture, right? So it is what it is, but Our bias is still to the downside. It's still always to the downside. So Again fundamentals in play yeah as We uh, we we choose our direction We wait for prices to come into those areas And then we decide whether we want to be you know selling there or if we see a an entry trigger You know for us to get short and I ended up getting short around here I think making around about About a 13 to 1 on this one recently into november. So um lost a couple of times here Maybe once or twice, but you know it pays off in the end just a bit of patience So let's go into November so november Right. So the fed is on hold for now, but it might not take much to change that so Fed and the market for now are on the same page and expecting interest rates to hold steady for a while Right. So they're not looking to cut rates anymore. They're not looking to weaken their their their economy Sorry, their their their their their currency The economy is on decent footing as said by you know the fed Expectations for one to three more cuts in 2010 with the strategy strategy with one strategy Sorry, apologies Even seeing a possible hike ahead. Okay, so potential hike. So Interest rates are on hold for now. Federal reserve officials have indicated As much as the market believes But the state of affairs could be fleeting amid a never-changing set of economic conditions And that's what i alluded to before so what they do is they have to look at the data and then adjust Their positions just because they say they're going to cut or hold or hike doesn't mean that they will they have Certain narrative and then they're looking for Data to confirm that narrative and if it doesn't confirm it does the opposite then what do you think's gonna happen? They're gonna have to do the opposite and that's what we do. We just look at to see what the the data holds So pretty much everyone is convinced that the fed is finished for 2019 which they have been A year which in which it cut its benchmark rate three times to a range of 1.5 to 1.75 What happens in 2020 though is open wire to interpretation And it says in congressional terror testimony last week the fed Jerome Powell said current policy is likely to remain appropriate. So basically we're going to hold As long as growth continues and inflation trends to two percent Yeah, and we have the european central bank In contrast amid its rock bottom interest rates threaten financial stability. Well, so again some different Difference in contrast between You know the the problems of the fed and the problems of the european central bank and i think christine lagarde Obviously, she's now the new european central bank and it says the european central bank has admitted that its own record low Interest rate is destroying banks profits and poses a key threat aligning regions financial stability Risks to the euro if you're an investor, where are you placing your money? Where are you putting your money? right with a dollar or with the um With the european central bank, right? It says there's negative rates squeeze savers across the eurozone and make it impossible for them to earn inflation beating returns So again, it's it's making they can't even put their money in the euro and hold it under You know, they're they're mattress because um inflation is eroding their Their currency. So what do you think is going to happen to the euro the euro Then becomes a funding currency like the yen where they You know borrow euros and then they put it into they put their currency and or their investment into a A higher yielding currency or asset because they're getting nothing for the euro Yeah, they're getting absolutely nothing in fact. It's worse because you know of inflation All right, and then we are into december December so the Fed stands pattern rates expect no change in 2020 And the ECB keeps policy unchanged with doors still open to more stimulus So again, you've got some diverging policies right there at the moment and again, you have the Fed Yeah, the Fed FED Right holding rates Yeah, holding rates. Everything's okay Whereas the ECB Right are Trying to potentially or maybe potentially weakening their currency with more stimulus right more stimulus more weakening of the currency So again, who's in the worst position? Yeah, who is in the worst position? um I keep answering the question and I guess where we are now and let's go to probably like a live chart now and let's see You know, what's happened So live chart where we are in december. Yeah, december the 13th was last week I'm recording this on the weekend and you can see pretty much where you know prices are falling away Prices and prices again don't indicate value prices have to pull back when prices pull back This is where the bargains are these are where the potential bargains are It was a bargain here And it looks like it's going to be a bargain there prices come up. It's a bargain there Bargains are very difficult to To to actually determine just technically because if you don't understand what's going on fundamentally Then how are you supposed to determine, you know, what really is a bargain? Yes, we've had a bit of an uptrend over the past, you know Week or two, but look at what's happened in 2019 This is just a pullback for traders like myself who understand the fundamentals who understand value who understand that the euro Price doesn't indicate value The more prices come up and get you know cheaper for the dollar the more I want to be a buyer At these areas of supply Because overall when I'm looking at what's happening in policies And what's going on when it comes to GDP interest rates and inflation You know, it's it's a no-brainer literally to just you know stay short until the data changes So what is in store for the euro dollar in 2020 more of the same a change in shift? What do you think me personally more downside? But uh, you know, we have to you know, I obviously understand what's going on with the data and uh If any kind of you know shifts in that and one of the things that I use at trading 180 Is our fundamental analysis spreadsheet, which has pretty much been spot on when it comes to Rating and ranking the euro dollar and what we do is We get macroeconomic data like the GDP interest rates and inflation and others And uh, you know, we basically put it in a spreadsheet, which is created by a gentleman by the name of Shane thank you very much Shane if you're watching this and uh, what it does is it ranks the countries based on certain macroeconomic data And number one being a status is our buy. It's a strength anything that is one Two and three we look to buy and anything that is eight, you know Six seven and eight are the weaker currencies and this is what we use to sell and again, this is updated And uh, you know certain ranking shift depending on you know, what economic data comes out and the numbers So just because the euro area is number eight now It doesn't mean it's going to stay number eight for the foreseeable future depending on what happens with inflation Interest rates GDP and others But for now, we pick our Um, our currency pairs that we want to you know, get trade and get short on strength versus weakness based off of our fundamental analysis spreadsheet And it's kept us in good stead. It's kept us in good stead Um, and understanding, you know, it's pretty much predicted You know, uh, this uh the downtrend. Yeah, say predicted, but it's uh, you know Kept me short. Anyway, this whole year. I haven't bought a single uh, you know euro against the uh against the dollar this year and uh So if you do want to get access to the fundamental analysis spreadsheet and myself where I go over You know, my fundamental analysis pretty much every day in our discord group You can go to trading 180.com And uh sign up there and uh, you can look for more information or you can email me at info at trading 180.com. I know this is a bit of a long one But I hope you enjoyed it. I really do hope you enjoy it And this is the level of analysis that we do on each of the currency pairs each of them Every country is analyzed is scrutinized Um, you know gdp inflation interest rates and others And we go through in depth analysis to choose the best currency pairs To and the ones that are most likely to trend or range because we have both trending and ranging Strategies technical strategies. We go over manipulations how to take advantage of traders through capture pain relief in a zero sum game All of that. It's more than just supply and demand technical analysis. So guys Hope you have a great Christmas. Um, pretty good be one of my last videos for this year And uh, yeah guys have a great one and Take care