 Hi, my name is Leon Rowe Covency trader and trading coach at trading 180 comm and in this video I'm gonna really show you Why you should apply fundamental analysis to your technical zones and I always say to traders that there's no Technical level that's gonna stand in the way of fundamental analysis and you know fundamental analysis and resentment analysis is really where you should Try to take your bias from and determine your bias from not necessarily fundamentals And so there was a demand zone here that many traders would have taken for various reasons And it didn't work and I'm going to tell you the fundamental reason why this was unlikely to work and One of the other reasons why you should kind of apply fundamental analysis to your trading is because then you can not only Pick the you know the best zones But also pick the best pairs right the pairs that are likely to trend and the pairs that are likely To to not trend right if you're employing Trend and I guess range based strategies And so why would traders have taken this demand zone in the first place, right? because at time if you go back use the Replay tool right traders would have been looking at this area here at least As it's known to get involved in based off of the recent trend, right? So we've got You know prices making higher highs and higher lows right here Dominant trend. Yeah, even if you zoom out a little bit even breaks past, you know previous Previous high. Yeah, and so everybody is taught online that that is the continuation of a strong trend Right nice bearish. I'm sorry bullish move to the upside support becomes resistance Resistance becomes support. So the trend should want to continue. It looked like it was continuing around here as well and But something obviously changed right something changed now Fundamentally, let's start off with the dollar and why really you should probably be looking and this is not financial advice Of course, but why I am a got a short bias on the dollar and for several reasons one being The recent news that came out on Friday that the federal Favoured inflation gauge rises by less than forecast, right? So the core PCE index climbed 23% last month January January revised down, right? And so a key gauge of US inflation rose last month by less than expected and consumer spending Stabilized suggesting the Federal Reserve may be close to the end of its most aggressive Cycle of interest rate hikes in decades. And so if you're not too sure What that means ultimately? interest rates are hiked and that tends to typically appreciate a currency and Central banks tend to hike rates in the face of rising inflation because inflation actually is the devaluation of a currency so to counter devaluation the currency devaluation Central banks will hike rates, right? And so the end of their hiking cycle is coming to a potential end Sooner as inflation starts to actually come back down to their 2% inflation target, right? and so the end of Rate hikes, which again typically and usually not all the time But it has the effect of appreciating a currency, you know that Monetary policy is coming to an end and in fact City Bank their city bank analysis 27th of March I'm recording this on the 3rd of April Their long-term forecast is actually forecast if we look at the dollar I'm here forecast the dollar to actually go dollar index to go lower right over the next one to three zero to three months one one oh one fifty three and then six to twelve months looking at 96.8 and Another reason is that we find that city analysts are still forecasting a US recession in the second half of 2023 and so whether a second potentially on the cards later this year Central banks not really gonna want to hike into a recession because it basically Will cause the economy to contract even more because you're hiking borrowing and lending costs in a an economic environment where Business isn't doing too well right in the recession. So they tend not to want to hike all in fact It's I can that cycle. In fact, it'll be the cutting of the cycle now again. This isn't set in stone This isn't a prediction in terms of you know, it's going to happen This is just a forecast about what is known currently about the state of the US the US economy. Yeah, and so With all that taking shape we have on the You know on at this area here You know, why would you want to buy the US dollar is the question, right potentially you wouldn't right or I wouldn't personally they're they're bad, you know pairs and occurrences to buy right games, maybe the dollar but We go from the dollar to the Canadian dollar now, right? So we don't really want to buy the US dollar here, right or buy the US dollar at all And now we look at the Canadian dollar, right? What would make the Canadian dollar strengthen? potentially against the US dollar and what happened on Friday was that the Canada's economy showed a surprising or showed surprising strength Despite its rate cuts the GDP was on track for a two point 8% annualized growth in the first quarter And Canada's economy kept growing at the start of the year defying Expectations of a stall and eventual technical recession in the face of the highest interest rate in the year 15 years, right? And so Again It talks about the highest interest rates of 15 years because interest rates are supposed to actually contract the economy the design to contract the economy and in fact Get this beyond the scope of this video, but central banks do want that the economy to contract an employment to rise to get inflation down, but again, that's Something there's something else, but the point is is that there was some decent news out of Canada And they may you know at least stall their Recession later this year also as well What came out today was that? OPEC ended up cutting supply and By doing that Cutting supply and a surprise Shock cut the market is now pricing in potentially some markets Banks are pricing in a hundred dollar oil right to tighten markets. And so Goldman Sachs is pricing it By hire by five dollars to ninety five dollars a barrel and there are several other Banks, you know from Goldman Sachs Bank of America to see group RBC Etc. All talking about, you know, what the effects of the shock cut that OPEC done over the weekend and Why is that relevant because to the Canadian dollar because the Canadian dollar and oil are correlated They said the exchange rate between Canada and the US is often strongly correlated to the price of oil over the long run Yeah, because it's not 100% correlated just because oil goes up today doesn't mean that the Canadian dollar will go up today So, you know, but over the long run, right? When the price of oil rises the value of the Canadian dollar also called the loony also Usually rises right usually is the key word It's not all the time, right? So relative to that of the US dollar the correlation can be directly attributed to the way Canada earns most of its US dollars from the sale of crude oil and the percentage of Canada's revenue That is that this constitutes and so this goes into a bit in depth But point being is that if oil is correlated to and usually correlated to You know oil and we see oil Looking to go to a hundred dollars or go a lot higher than it is right now Which is currently maybe around about 85 dollars a barrel something like that then the combination of a Stronger potentially stronger Canadian dollar. Yeah in this area and a weaker dollar, right fundamentally The technical analysis level was unlikely to hold now again We deal with probabilities in trading wasn't 100% You know going to you know hold or not hold but the likelihood of that holding was very very low at that point in time So if you were looking for just all back Right into you know, maybe some sort of 50% level as a trend You know was from this low for example to this high and then you're looking at the you know 50% call back or even if you're looking at some sort of Fibonacci pullback, right? So let's change that to Fib retracement, you know 61.8% you know fib, right, which would have been somewhere around here Yep And that would have aligned with again some sort of resistance in and around that zone with traders Probably look like they will it was bouncing off of if you go down to the lower time frame Traders probably would have been looking at yeah that area there is a level of support and resistance Yeah, it starts to bounce off there, but then it falls even further again There's no Technical analysis level that's gonna stand in the way of strong fundamentals So you might as well have the fundamentals on your side first before looking at the technicals right makes sense and so You know price action wasn't predicting that oil, you know OPEC we're gonna cut rates It's impossible to determine that from looking at a price chart. It's impossible. So You know, it was basically just a pullback from a level You know from a low to a new high traders would have been looking at, you know potential 38.2 pullbacks 50% pullback 61.8% pullbacks and then obviously prices have just cut through those levels because you know the dollar at the moment has a you know, I guess it's self-bias from a lot of banks and the Canadian dollar actually has a bit of a reversal of fortunes and so the market is revaluing the exchange rate of the dollar CAD Lower for now. So with that being said if you do want to Fly fundamental analysis to your trading head over to trading 180.com currently The mentoring group is open. It won't be open for long. So Head over to trading 180.com if you want to learn how to apply fundamental analysis to your trading and avoid You know taking trades like this more often than not and also as well Learning how to choose the best pairs You know in forex and so you can you know change your your trading Fortunes anyways guys take care and till the next video