A Fundamental Course You Can Understand from the Basics by “Market Narrator” Koichiro Ameya—Episode 3: Understanding Market Breath to Grasp Currency Movements

In FX, many people use technical analysis for market analysis, but to analyze and judge the market accurately, fundamentals are also indispensable. Here, we will have Koichiro Amaya explain the depth of fundamentals and how to use them, so let’s study seriously together with the trend-following expert Itchan.

Instructor: Koichiro Amaya

Koichiro Amaya. Over more than 20 years, he has held key foreign exchange positions at major foreign banks such as UBS, JP Morgan, and BNP Paribas. He also has a background of ranking highly in the “Euro Money” financial magazine’s Tokyo FX market popular dealer rankings. In 2006, he became a freelance financial analyst and now provides FX company and portal site readers with his sharp, independent perspective on FX market information.

Participant: Itchan the Trend-Follower

Itchan the Trend-Follower. Kept as a precious student by Keechi, the twin childrearing housewife. He loves trend-following and is active to convey the wonders of trend-following. But sometimes he also does contrarian trading.

Official site：Itchan the Trend-Follower FX ~Real trades 공개~

※This article is a reprint/edit of an article from FX攻略.com, August 2019. Please note that the market information in the text may differ from the current market.

Even if the indicators show good results, the market may move against expectations

ItchanLast time we learned about the purpose of fundamental analysis. This time I’d like to learn about the meaning of studying fundamentals. First, regarding the phrase I touched on at the end of the last session, “capturing the breath of the market,” what exactly is the market’s breath?

AmayaThe market’s breath refers to the market moving differently from what would be expected in response to important factors, and we regard that as a key point. Our generation involved in investing all has this sense. In the FX market, it’s not always the case that currencies with good fundamentals always rise, nor that currencies with bad fundamentals always fall.

ItchanIndeed, there are times when economic indicators come out well but don’t move much.

AmayaThat means the factors are already priced in. Additionally, when “market interest changes and the rules of the game shift” or “for reasons unclear, smart money such as hedge funds changes strategies,” even if a news item provides selling catalysts, prices may not fall as much as expected, or may rise when they should fall. This is the so-called “birth of change,” which is what is called the market’s breath. Understanding this makes the market much clearer to read.

ItchanGrasping the market’s breath lets you see aspects that pure fundamental analysis alone cannot reveal.