Interpreting U.S. Fundamentals from the FOMC Statement [Koichiro Amaiya]
We often hear the phrase, “fundamentals are difficult, so I don’t really understand them.” Indeed, topics like the economy, finance, and fiscal policy are serious, but that doesn’t automatically mean they’re hard to grasp; there may be tips to understand them more easily. Here, to boost your basic understanding of fundamentals, veteran financial analyst Koichiro Amaya will summarize the information you should know.
Table of Contents
1. The King of Trading
2. How to Grasp the Big Picture
3. FOMC Statements
4. How to Read FOMC Statements
5. How to Read the Dot Chart
6. Understanding Market Interest Rate Views with FF Rate Futures
7. Summary
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※This article is a revised version of a FX攻略.com October 2016 issue
Koichiro Amaya (Amaya Koichiro) Profile
For over 20 years, he has held senior FX positions at major foreign banks such as UBS, JP Morgan, and BNP Paribas. He has ranked high in the Tokyo FX market popular dealer rankings in the financial magazine EuroMoney. In 2006 he became a freelance financial analyst, providing FX market insights to FX companies and portal sites from his sharp, independent viewpoint.
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The King of Trading
Fundamentals are translated as “the basic conditions of the economy,” but many people find themselves avoiding them because they’re full of unfamiliar terms and complex reasoning. Some may even choose to trade only using technical analysis and ignore fundamentals altogether.
However, trading solely on technicals is like driving in the dark with no headlights—acceptable for experienced investors, but not advisable for those just starting out.
Moreover, the current market may or may not have a trend. If there is one, is it bullish or bearish? Being able to judge this gives you an edge in trading, and makes your technical methods more reproducible. And fundamentals analysis is indispensable for that judgment.
I believe the King of Trading is to grasp the big picture with fundamentals analysis and to determine entry/exit levels and timing with technical analysis. With a big-picture perspective, you won’t be swayed by short-term movements or news, and you can trade with confidence.
Conversely, without a big-picture view, you’ll merely react to short-term moves, resulting in erratic, haphazard trades. Therefore, beginners especially should become fluent in fundamentals and apply it to trading.
